Downloads
Aviation demand is primarily driven by airline strategies and travel trends, economists say.
A new study by two economists, commissioned by green group T&E, shows that aviation demand depends mostly on airline strategy and market trends, such as changed travel behaviour. This refutes airlines’ claims that national aviation taxes and fees are solely responsible for driving passengers away, says T&E.
The study looks at the relationship between location-based costs and passenger volumes for 101 European airports in 2024 [1]. Findings show that airports with low costs do not guarantee higher passenger numbers. In fact, airports with higher costs tend to have more passengers. Heathrow Airport for example has the highest location-based costs but also the highest passenger numbers in Europe. Consequently, the study finds there is only a weak correlation between costs and passenger numbers in this order of magnitude of taxation [2]. This is also shown by a further analysis of the relationship between changes in ticket prices and changes in passenger numbers to date, which again only found a weak correlation. Hubs, international agreements, and market strategies are more likely to determine whether an airport is important and being served.
Marte van der Graaf, aviation officer at T&E, says: “Airlines are trying to tell an easy story by blaming location costs for decreased demand. But this is just a campaign to cut taxes and fees. Demand for flying is not such a simple numbers game. In reality, strategic decisions by airlines, trends in travel behaviour, and airline business models influence passenger numbers, rather than costs alone.”
Historically, increased prices in air travel have not curbed demand. In Germany, for example, the 2019 jet fuel price was twice as high as in 2000, but in the same period passenger numbers grew by 75%. Demand in aviation is instead mainly determined by supply. Airlines set their flight schedules months in advance and then fill seats by adjusting prices. Associated costs like hotel expenses could also affect demand, the study suggests.
Reduced passenger demand could also be linked to the global decline in business travel after the COVID pandemic. T&E's Travel Smart Campaign finds that business travel by the world’s biggest companies fell by 34% between 2019 and 2023. Meanwhile, leisure travel is growing in dominance. While business travellers usually fly to economic centres, leisure travel is concentrated towards holiday destinations, increasing air travel to southern European countries by 10 to 20% in 2025, compared to 2019. Overall, trends in travel behavior tend to have a greater impact on passenger demand than taxation and other costs.
T&E recommends national governments not to cap or reduce levies. Cutting aviation taxes, fees and charges would mean throwing away billions in public revenues without a tangible effect on passenger numbers. National ticket taxes should be designed to reflect economic externalities, i.e. the most climate-damaging tickets should have the highest taxes. This means higher tax rates for first and business class tickets and higher tax rates for long haul flights.
“Airlines tirelessly blame levies for their billion-dollar business not doing as well as usual. If taxes and fees were lowered now, it would simply be a gift to the airlines, while emptying national budgets from much needed money. The revenue from fair taxation could be invested in sustainable aviation fuel.”, concludes van der Graaf.
[1] The study by economists Prof. Friedrich Thießen and Prof. Christoph Brützel analyzed costs for airports arising from national levies and compared the number of passengers traveling to and from these airports. It was factored in if the airport type changes results. Also, it was verified that a traditional price elasticity analysis is not reliable in aviation. The study amplifies a DLR study from April 2025.
[2] With proper taxation, which would imply another order of magnitude of cost increases, aviation taxation could become a demand management tool. But current minor variations in national taxes, charges and fees do not show a strong correlation with demand.
