European flag carriers face a financial shock if Brussels extends carbon pricing to all flights departing the EU. Analysis by Transition Metrics shows Lufthansa would incur €1.8bn in additional costs by 2027, with IAG Group at €1.7bn and Air France-KLM at €1.5bn.

The emissions trading system currently covers only intra-EU flights, sparing long-haul operators from the steepest penalties. Extending coverage could add €100 to a Frankfurt-Beijing ticket if airlines pass costs to passengers. The projections assume a carbon price of €120 per tonne, significantly above current forward prices.

These outlays would consume roughly 44% of Lufthansa's 2025 earnings, creating hedging challenges for 2027 ticket sales already underway. Airlines for Europe and individual carriers oppose the extension, warning it could trigger trade retaliation similar to 2012 when the US exempted its airlines.

The EU faces mounting pressure to act as aviation emissions remain unchanged while other transport sectors cut output. However, the geopolitical complications and fierce industry opposition suggest any expansion will prove contentious rather than straightforward.