Mikko Kiesiläinen column: Passengers should pay more to fly

More transparency, fewer subsides, a flight tax and realistic prices. Would it stop people traveling around Finland by plane?

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File picture of plane in flight / Credit: iStock

Last year Sweden implemented a flight tax, which is meant to curb carbon dioxide emissions in the airline industry. The tax is around €6 for domestic, and €41 euros for intercontinental flights.

At the other end of the spectrum, Finland uses public funds to subsidize air traffic.

Out of all the airports operated by Finavia, the company that maintains and develops all commercial airports in the country, only Helsinki Airport is economically profitable. The profits that Helsinki makes are used by Finavia to make up for the losses incurred by the 18 provincial airports it operates. These airports generate a loss of around €20 million per year. On average, each of these provincial airports loses around a million euros every year.

Provincial airport funding lacks transparency

The profits made by the publicly owned Helsinki Airport are public funds in the same way as tax revenue. Therefore, their use should be decided upon by using the same principles used in the allocation of other public funds. The current system, however, does not do this. Instead of subsidizing provincial airports, the €20 million could be distributed to the state as dividends, which could then be used to fund, for example, education or health care.

It is also entirely possible, that government budget negotiations would come to the conclusion that subsidising provincial airports is the best use for the €20 million. However, now that the subsidies are decided upon internally at Finavia, the use of these public funds is not transparent or democratic. For example, Finavia does not disclose precise information on how incurred losses are distributed among their airports.

Due to the high fixed costs, profitability of an airport is highly dependent on traffic volume. Because of this, Helsinki Airport with its large number of passengers can support a long list of non-profitable airports. It also means that the smallest airports incur the largest losses.

Air passengers should pay for the costs of flying 

The Savonlinna Airport is one of the smaller airports that Finavia operates. Because of this, its losses are most likely over a million euros per year. In addition to the €1 million in subsidies from Helsinki Airport, the city of Savonlinna and the Finnish Transport Infrastructure Agency Väylä subsidizes Helsinki-Savonlinna air traffic with €2.2 million per year.

Altogether, passengers of the Savonlinna airport get at least €3.2 million in public funding every year. In the past 12 months, around 10,757 passengers traveled through the airport. Therefore, the price tag of the subsidy is €297 euros per passenger.

People that fly through Savonlinna Airport get disproportionate support for their travel. If subsidies were ended, a back-and-forth flight from Helsinki to Savonlinna would go up to 600 euros. I imagine there are not very many passengers willing to pay this real sum. A flight tax has its perks, but first Finland has to at least make airline passengers pay the real expenses for their flights.