Flight Club New EU ETS proposal expands scope to include some longer-haul flights, increasing carbon costs for the sector

Research evidence excerpt

Flight Club New EU ETS proposal expands scope to include some longer-haul flights, increasing carbon costs for the sector

J P M O R G A N Europe Equity Research

20 July 2026

Flight Club

New EU ETS proposal expands scope to include

some longer-haul flights, increasing carbon costs

for the sector

The EU Commission on Friday published its new EU Emissions Trading System European Transport & Logistics

AC(ETS) reform proposal, which expands the scope for European Airlines to pay for Harry J Gowers

carbon emissions for flights departing the EEA to third-country destinations within (44-20) 7134-7522

a 5,000km radius. This therefore brings some longer-haul flights into scope, harry.gowers@jpmorgan.com

including flights to Turkey, the Middle East and North Africa, which are served by J.P. Morgan Securities plc

both the European LCCs and Flag Carriers. However, the proposal will not include Alexia Dogani

flying to North/South America and Asia Pacific, where the European Flag Carriers (44-20) 3493-3791

alexia.dogani@jpmorgan.com

have significant operations. We estimate additional annual costs for our coverage J.P. Morgan Securities plc

of c€600m in total (based off current carbon prices) as a higher proportion of the

Bhavpreet S Batra

sector’s carbon emissions are paid for, with the highest absolute cost increase at (91-22) 6157-5046

Lufthansa, but highest % profit impact before any mitigation at Wizz (impacted by bhavpreet.batra@jpmorgan.com

low levels of profitability currently). We would expect the sector to try and pass J.P. Morgan India Private Limited

through higher carbon costs through higher ticket prices, where we estimate the Shikha Khurana

Flag Carriers would need to increase RASK by +0.4% on average to neutralise the (91-22) 6157-5022