Proposed changes to Iceland’s Loftbrú subsidy spark regional backlash

A proposal to overhaul the way Iceland subsidises domestic flight tickets has stirred strong opposition among regional leaders and residents, according to a report by Austurfrétt. The government is weighing whether to change or reduce the Loftbrú subsidy scheme, which currently helps keep air fares down for people living outside the Reykjavík metropolitan area.

At the heart of the proposal is a shift from the current proportional discount to a system where the state would try to negotiate fixed prices for domestic flights. Sociologist Þóroddur Bjarnason, described in news reports as an expert on the subject, has suggested this new approach would more fairly support rural residents by providing predictable fares.

Officials say one reason for considering the changes is that the annual cost of Loftbrú has exceeded the government’s 600 million ISK contribution for three years running. There are also concerns that offering proportional discounts in the current system encourages price increases from airlines on domestic routes.

Critics argue the changes would do little to address high prices and travel barriers faced by people in Iceland’s regions. Þóroddur Bjarnason warned, “Changes to Loftbrú do not address the real problem of rural people.” The proposal comes as reports show rural residents can sometimes be faced with paying tens of thousands of krónur for last-minute flights, with a family of three paying up to 150,000 ISK to travel to the capital.

Bæjarráð Fjarðabyggðar, the municipal executive council in eastern Iceland, has strongly opposed the plans. The council described the cut to subsidies as ‘an attack on living conditions in the regions’ and called for the government to scrap the proposal immediately. Local representatives elsewhere have called the proposal another blow for the regions and said it would unfairly reduce support for rural residents.

Loftbrú has been funded at 600 million ISK per year since its first full year in 2021. However, due to inflation, that amount had the purchasing power of 779 million ISK in 2021, but only 572 million ISK in the current year. On average, the subsidy costs 12,000 ISK per person living outside the capital area.

Topicsdomestic flightsFjarðabyggðIcelandairLoftbrúrural Iceland