Lufthansa and Ryanair Cut German Capacity Amid Tax Pressures

The German aviation sector is undergoing a significant structural contraction as carriers respond to a confluence of rising operational costs and regulatory burdens. The EU ETS (European Union Emissions Trading System) has reached a critical milestone, with the phase-out of free aviation allowances hitting 100% in 2026. This policy change, combined with high airport fees and the Luftverkehrsabgabe (German Aviation Tax), has prompted major operators to aggressively restructure their German footprints.

Lufthansa CityLine Closure

Lufthansa permanently ceased operations of its regional subsidiary, Lufthansa CityLine, on April 18, 2026. The move saw the retirement of 27 CRJ (Canadair Regional Jet) aircraft, a decision the group attributed to the need to curb losses amid soaring kerosene prices. This restructuring follows a historical pattern for the Lufthansa Group, which previously folded Germanwings into Eurowings in 2020 to streamline operations. Employees from the shuttered entity are currently undergoing transition processes to other group platforms, such as Lufthansa City Airlines, under revised labor agreements.

Ryanair Berlin Base Exit

Simultaneously, Ryanair has announced the closure of its 7-aircraft base at BER (Berlin Brandenburg Airport), effective October 2026. This decision will result in a 50% reduction in the carrier's Berlin passenger capacity, dropping from 4.5 million to 2.2 million annual passengers. According to Ryanair Corporate News, the airline characterizes the German aviation market as "broken," citing a lack of strategic government support regarding tax and fee structures. This exit mirrors the carrier’s 2022 departure from Frankfurt, reinforcing a trend of reallocating fleet assets to markets with more favorable cost environments, such as Italy and Slovakia.

Environmental and Regulatory Costs

Under the European Commission Fit for 55 directive, the removal of free emission allowances forces airlines to purchase carbon credits for all intra-EEA (European Economic Area) flights. While the German Federal Government passed a vote in May 2026 to reduce the short-haul aviation tax from €15.53 to €13.03 effective July 2026, industry executives remain skeptical. Airborne Consulting CEO Gerald Wissel noted that while the state is sacrificing revenue, the reduction is unlikely to translate into lower ticket prices for passengers. Conversely, labor groups such as Verdi have criticized the tax cut as an unnecessary subsidy for airlines that undermines public funding.

Stakeholder Impact and Market Outlook

For BER, the departure of Ryanair represents a significant loss of both aeronautical and non-aeronautical revenue. The airport has already seen traffic decline from 36 million passengers in 2019 to 26 million in 2025. While some regional airports may benefit from shifted capacity, the broader trend indicates a contraction of the German aviation market. The industry is now monitoring the European Commission’s mid-term ETS review, expected in July 2026, which may further influence the competitive landscape for intra-European routes.