Passengers to lose out as airlines plan to spread the cost
Luthansa says how it will pass on the cost.
Amid wide-ranging estimates of the impact on passengers of the inclusion of airlines in the EU’s emissions trading scheme (ETS), German airline Lufthansa has dispelled some of the confusion by becoming the first carrier to specify how it will handle the costs. On Monday (2 January), it said it will pass on €130 million in 2012 through the ‘fuel surcharge’ that it already levies on customers, which is currently as much as €122 for intercontinental flights and €31 for European flights.
Airlines are covered by the ETS as from 1 January, and the consequences for the travelling public might be to ramp up the cost of a family of four taking a transatlantic flight by as much as €156 – or to add as little as €8. On the assumption of a carbon price of €17 per tonne by 2020, the European Commission calculates that ticket prices could rise by a maximum of €12 for intercontinental flights – and less if airlines choose not to pass on 100% of ETS costs.
A study by Civitas, a British think-tank, predicted on Tuesday (3 January) an extra cost of £33 (€39) per passenger by 2020, based on a calculation by Standard and Poor’s that assumes a carbon price of €30 in 2020.
The Lufthansa group, which also owns Swiss International, British Midland International and Austrian Airlines, and has a major stake in Brussels Airlines, will decide on the exact charge per ticket the next time the fuel surcharge is revised, a spokesperson said. The new regime will create problems for Lufthansa, he added, because it must compete with airlines that are less subject to emissions trading costs.
Carbon market analyst Point Carbon estimates that the costs of participating in the scheme will not be high for the industry as a whole in 2012 – perhaps €500 million. This is because the price of carbon is currently at a historic low of around €7 per tonne, and airlines will receive 85% of their allowances for free at the start of the scheme. But assuming a rise in the price of carbon and a decrease in the number of free allowances, the analyst predicts that industry costs will be €9 billion per year by 2020.
Passenger taxes
Some member states plan to lower their existing taxes on air passengers to compensate for increased costs to passengers from the ETS. In some cases, airlines could, in the short-term, make a profit, as the tax reduction might be lower than the ETS costs. For instance, Germany’s tax for a flight from Frankfurt to New York has been lowered by €2.82 for 2012, while at the current carbon price, the direct cost to airlines from the ETS would be just €0.45 per passenger, according to a calculation by Peter Liese, a German centre-right MEP.
A report by the Environment Agency of England and Wales in November suggested that some airlines could benefit from the ETS, because they will be granted more free allowances than they will use. The free allocation is based on each airline’s revenue-tonne-kilometres in 2010. If an airline’s emissions have not increased since 2010 – if, for instance, it has scaled back its flights to Europe – it stands to make a profit.