Why the German aviation market is broken: Analysis

 Germany’s Aviation Market Struggles

Germany’s Aviation Market Performance

It’s a fact Germany is one of Europe’s worst-performing aviation markets, with just 79% of capacity compared to before the pandemic.

Ryanair CEO’s Criticism of High Fees

But who's to blame? Ryanair CEO Michael O’Leary says Germany is charging sky-high fees, forcing airlines to either push up ticket prices or scrap routes altogether. But of course, they want to reduce taxes, so is this just a self-serving argument? I went to Ryanair HQ in Dublin to find out more.

Challenges Faced by Airlines

The company is facing headwinds. Airfares have fallen, and they expect capacity to fall too. Slashing taxes and fees would be a convenient way to fend off a fall in profits.

"Airports have been doubling their fees. You cannot have this kind of rapacious taxation of air travel and see anything other than traffic declines. And all of the traffic is going to those other countries across Europe who, unlike Germany, are reducing taxes and lowering airport fees and charges."

"We need to scrap these environmental taxes, lower ATC fees, and get back to making Germany an attractive destination again. I think it will happen, but it'll take two or three years of failure before they change these failed policies."

Is There Fair Competition in Germany?

"Do you sense there's a level playing field in Germany in terms of the aviation industry?"

"No. I mean, Lufthansa's always been heavily subsidized. We have no desire to go in and compete with Lufthansa in Frankfurt or in Munich, but there's no reason why Ryanair couldn't deliver a lot of growth in regional airports like Hamburg, Stuttgart, Cologne, Berlin. But not in a marketplace where the government is raising taxes and airports are raising fees and charges."

Airlines Cutting German Routes

Ryanair needs to cut costs, which means focusing on cheaper airports, increasing capacity on more popular routes, or waging a campaign against fees. But it's not just Ryanair.

EasyJet and Eurowings have cut German routes, and Lufthansa CEO Carsten Spohr has also suggested it could do the same.

According to the airline, a typical A320 flight from Frankfurt costs over €4,400 in fees, but from Istanbul just €500. That's for the likes of tax, security charges, and air traffic control fees.

Decline of Low-Cost Airlines in Germany

In Europe as a whole, low-cost airlines have seen market share increase by 2% over pre-pandemic levels. But in Germany, the same airlines' business is 30% below 2019 figures.

Are German Airports Holding Airlines Back?

Berlin Airport beat its passenger goal in 2024 with over 25 million people passing through, but that's still below pre-COVID numbers. Could taxes and high airport fees be holding back growth and passenger options?

To get a view from the top, I sat down with Aletta von Massenbach, the CEO of Berlin Airport.

Berlin Airport CEO’s Response

In a recent interview with DW, Michael O’Leary said that Germany is poisoning the aviation industry, pointing to some of these higher fees.

As someone who works in the industry, would you agree with that?

"They are looking and they have to look after cost. So we know that, and therefore we are very cost-conscious as well. So we do everything in order to operate this wonderful airport at a cost level that is acceptable to our clients."

"So the fee structure—coming back to your question—we are very much normal. We are very, very normal when it comes to the level of cost compared in Germany but also at the European level when it comes to the airport charges."

Will the German Government Act?

"Will the German government blink on these higher taxes, or is this something that the industry is going to have to deal with in the long term?"

"Well, I'm confident that the German government is becoming more and more aware of the importance of air connectivity and the importance of this air connectivity for the different regions these airports serve."

"So the importance for economic development, the importance for their citizens to be able to visit their families, their friends. And to make aviation and air aviation and flying so that it remains also affordable."

Government’s Justification for Higher Costs

Germany’s Transport Ministry says location costs have risen at almost all European locations, driven by external factors such as inflation, labor shortages, and consequently rising wages and salaries. Germany is no exception.

The company in charge of controlling the majority of German airspace told DW:

"The narrative from airlines claiming that fewer flights occur because fees are too high is something we cannot support from our perspective. In fact, the opposite is true—fees increase when fewer flights occur. The equation is straightforward: more flights equal lower fees, fewer flights equal higher fees."

Blame Game in the Aviation Industry

The airlines blame the air traffic controllers and the airports. The airports blame the government. The air traffic controllers say there’s nothing to be done, and the government blames the economy.

Germany Compared to Other Markets

Taxes, fees, and airport charges in Germany are relatively high compared to most of Europe. But also, in other neighboring countries like Austria, for example, charges are relatively high.

There are some unfavorable framework conditions at the moment, especially in Germany. Apart from high costs, there is weak economic development and strong competition from high-frequency services provided by the state-owned railway company Deutsche Bahn. And all this makes it a bit less attractive for airlines to serve the German market, especially the domestic market.

Ryanair’s Expansion Plans in Germany

"I think there's the space within the German market for Ryanair to expand, no question. I mean, we put a proposal to government that would see us double in size over the next five years from 16 to 32 million passengers. We'd open more bases at German regional airports. We would deliver growth across all those airports."

"Government didn't even reply to the proposal. You know, if your government doesn’t even care about growth, well, why would we bother growing in Germany?"

Future of Germany’s Aviation Market

Michael O’Leary is right that costs are high and the German aviation market is struggling. But pinning the blame on ATC or airports isn't as simple as he claims.

Germany, more broadly, has a high-cost business environment, not just aviation, which simply doesn’t align with Ryanair’s low-cost strategy.

If Germany wants to boost aviation, the key decision will be down to the next government. Will it be willing to cut taxes or invest in lowering costs? Either way, the solution appears to be a political one. But whether the political will is there is another matter.