Europe's air passengers will face higher fares as airlines deal with "significant related costs" from replacing fossil fuels with sustainable aviation fuels (SAF), according to Standard & Poor’s Global Ratings.
And while the continent's "stronger carriers" will likely be able to pass much of the cost on to travellers, weaker airlines will see their credit ratings come under pressure from tougher emissions regulations compared to those faced by international rivals.
"Europe's regulations are both stricter and more expensive than elsewhere, meaning that airlines ferrying travellers within the region pay more for burning fossil fuels than those operating beyond its borders, " S&P said in a new report.
"The aviation sector's decarbonisation ambition relies heavily on replacing fossil fuels which come with significant related costs", the agency said, warning that "not all carriers are equally impacted" as the European Union attempts to "use pricing to encourage consumers toward
lower-carbon alternatives".
The EU's '"green deal" and related emissions trading system are based on a 90% cut in emissions compared to 1990 levels by 2050.
Carriers such as Ryanair have criticised the EU over what it says are discriminatory measures that benefit Europe's long-haul airlines over those flying within the bloc and the European Economic Area (EEA), as flights to and from regions outside these regions are to be subject to a less exacting UN-backed emissions reduction regime known as CORSIA.
Airlines have faced surging conventional fuel costs since mid-2021, with the price surges made worse by the fall-out from the invasion of Ukraine by Russia, one of the world's main sources of oil and gas.