Surcharge management of kerosene and CO_2 costs for airlines under the EU's emission trading

摘要

We develop a fuel surcharge model for air transport in relation to kerosene and CO_2. Price increases, however, induce demand reactions, which in turn may affect profitability. We incorporate demand reactions in our model to calculate an optimal kerosene and CO_2 surcharge. We use a numerical example for an illustrative airline network and show that prices on inelastic long-haul routes are faced with the highest price increases, whereas elastic short-haul routes see relatively mild price increases. We compare our results with a traditional surcharge management approach and find them about 5% better.