The French government has proposed a significant amendment in its 2025 finance bill in a bold and controversial move. The amendment would sharply increase the solidarity tax on airline tickets, or TSBA, for all flights departing from France.
This tax, which has been in place since 2006, charges a fee per passenger to fund international development projects.
The proposed increase is dramatic. It applies to tickets for flights departing from January 1, 2025, even if passengers bought them earlier.
This retroactive application could have costly consequences for the Air France-KLM Group. The company estimates a loss of tens of millions of euros if it must pay the difference for uncollected tax amounts.
This financial hit is significant enough that Air France-KLM took an unusual step to offset potential losses.
On October 24, 2024, Air France-KLM announced it would preemptively apply the higher tax rates to tickets sold for flights after January 1, 2025. This decision lets the airline collect the increased tax from customers upfront, matching the expected government rates.
By acting early, Air France-KLM hopes to reduce the risk of losing millions in tax obligations it couldn’t pass on to customers.
The new tax scale proposed by the French government categorizes flights into three main groups, each with a different rate. Domestic and European Economic Area (EEA) flights see the most modest increases.
The French govt's proposed tax rises on air travel would be a disaster for 🇫🇷
— IATA (@IATA) October 2, 2024
An impact assessment is critical. That would show why France would be better to follow Sweden's example & scrap aviation taxes. Our statement explains why 👇 https://t.co/Iv76JURfDU@MichelBarnier pic.twitter.com/Eb0jsBVdhV
The TSBA for Economy and Premium cabins on these flights will rise from €2.63 to €9.5. The increase for business class is from €20.27 to €30.
The increase is even steeper for international flights under 5,500 kilometers. Economy and Premium cabins will go from €7.51 to €15. Business and La Première cabins, which once had a tax of €63.07, will face a new rate of €80.
The highest rates apply to long-haul flights over 5,500 kilometers. Economy and Premium cabins, previously taxed at €7.51, will jump to €40. Business and La Première cabins will rise from €63.07 to €120, nearly doubling the prior rate.
These updated figures are reflected in the ticket prices sold by Air France, KLM, and Transavia, the leading airlines in the Air France-KLM Group. Travelers who book flights with these airlines for trips after January 1, 2025, will notice the higher TSBA in their ticket breakdowns.
This early adjustment not only protects the airline’s financial health but also provides transparency for customers.
The French government’s new tax rates are steep, and airlines are concerned about the financial and operational impact. The retroactive requirement to apply the tax has led some industry experts to question the amendment’s fairness.
Airlines argue that adjusting ticket prices on short notice could create logistical and financial burdens. Failure to collect taxes could result in substantial costs for an airline like Air France-KLM, which serves millions of passengers annually.
However, Air France-KLM’s proactive response has helped avoid a potential financial setback. By adjusting ticket prices now, the airline reduces the risk of a funding gap between what it collects and what it owes in taxes.
The Group’s early action also helps it avoid the need for costly administrative adjustments if the government enforces the tax increase as expected.
However, Air France-KLM’s current approach allows for some flexibility. If the French government changes, rejects or abandons the proposed tax rates in the final finance bill, Air France-KLM will adjust its collections to match.
The airline will refund or charge customers accordingly to ensure the tax amount aligns with the final government requirements.
The amended TSBA has sparked debate among various stakeholders. Environmental advocates view the tax increase positively, believing it could discourage air travel and promote more sustainable practices.
However, some travelers feel the tax hike disproportionately affects budget-conscious passengers who may need help with rising airfare.
While Air France-KLM’s proactive step mitigates potential losses, other airlines may face more challenging decisions. The amended tax affects all airlines departing from France, regardless of the airline’s country of origin or customer base.
This broad application means that international airlines will also feel the impact of the new tax rates.
The impact on travelers is also notable. For budget-conscious passengers, the TSBA increase could significantly affect the affordability of flights, even for short trips within Europe.
Some may reconsider travel plans or explore alternative transportation options, especially for shorter distances.
Nonetheless, the tax increase aligns with the French government’s commitment to sustainable development. Historically, TSBA revenue has funded health initiatives and development projects in lower-income countries, aligning with France’s broader commitment to global aid.
The French government’s decision on the TSBA rates will be monitored carefully in the upcoming weeks. Air France-KLM’s early adoption of the proposed rates highlights its proactive approach to navigating potential risks.
Still, other airlines may wait until the government finalizes its decision before adjusting their prices.
If the government passes the amendment as currently drafted, airlines operating from France will need to comply with the increased TSBA rates. This decision could lead to changes in ticket pricing strategies, especially as airlines strive to minimize the impact on their revenue and keep fares competitive.
Air France-KLM’s response is a case study balancing regulatory compliance and financial strategy. By adopting the tax rates early, the Group reduces uncertainty and sets a standard for transparency.
Whether other airlines will follow Air France-KLM’s lead or adopt a different approach remains to be seen.
As the travel industry awaits the final decision, passengers, airlines, and environmental advocates have their stakes in the outcome. Higher air travel costs shape traveler behavior, potentially leading to fewer short-haul flights and a rise in sustainable transportation options.
Yet, the increased TSBA rates could challenge international airlines, particularly as they adjust pricing to accommodate these new fees.
While Air France-KLM has set a proactive standard, the ultimate impact of this tax hike will depend on how airlines, customers, and regulatory bodies respond.
If the amendment stands, higher airline ticket taxes could become the new norm for travelers departing from France.