U.S., International Carriers Add Surcharges to Offset ETS

AIN Air Transport Perspective » January 16, 2012
Lufthansa Airbus A320-200
One day after Europe's emissions trading scheme (ETS) took effect for airlines, Lufthansa announced January 2 that it would add the cost of ETS to its fuel surcharge. (Photo: Lufthansa)
January 12, 2012, 9:24 PM

Numerous U.S. and international airlines added fare surcharges to certain flights in the first half of January, apparently reacting to the European emissions trading scheme (ETS) that took effect on January 1. Meanwhile, the deputy secretary general of the China Air Transport Association (CATA) said China’s airlines will not cooperate with the carbon cap-and-trade scheme, according to published reports.

Germany’s Lufthansa reacted first with a surcharge based on the ETS—and said so. The carrier announced January 2 that henceforth it would include the cost of purchasing CO2 certificates, or emission rights, in its existing fuel surcharge. Though it harbors no immediate plans to increase that surcharge, Lufthansa said it expects to incur €130 million ($167 million) this year in additional costs, based on the average trend in certificate prices. “Competition is tough, especially from non-EU companies whose operations are only subject to limited emissions trading rules,” the carrier said. “Lufthansa will have to pass on the costs via higher ticket prices, as recommended by the EU.”

Under the ETS, authorities will award 82 percent of the necessary certificates to airlines at no cost this year. Airlines will have to purchase another 15 percent of the certificates, with 3 percent reserved for new carriers.

After Lufthansa, Delta Air Lines acknowledged it has raised its international surcharge by $3 each way for flights between the U.S. and Europe, but didn’t say whether or not the reason involved the ETS. (Delta did not immediately respond to an inquiry from AIN.) United Continental, US Airways and American Airlines reportedly followed suit and raised surcharges $3 on flights to and from Europe. Airlines for America, which represents major U.S. carriers, estimates the ETS will cost U.S. carriers $3.1 billion through 2020.

Irish low-fare carrier Ryanair said January 12 that it would charge a €0.25 (32-cent) surcharge per passenger for all bookings beginning January 17 “to cover the costs of the EU’s new eco-looney ETS tax.” The assessment could cost passengers €15 million ($19 million) or more this year. Malaysian low-fare carrier AirAsia X on January 12 said it plans to realign its network and withdraw service to Paris and London from its Kuala Lumpur hub. It blames weakening demand and “exorbitant government taxes,” including the ETS, “which further adds to an already high cost.”

CAPA Center for Aviation, a Sydney, Australia, market analysis firm, compiled public remarks from 17 airlines indicating that most had either implemented ETS surcharges or considered them likely or inevitable. Cai Haibo, deputy secretary general of CATA, asserted in published reports that China will not cooperate with the ETS. CATA represents Air China, China Southern Airlines, China Eastern Airlines and Hainan Airlines.

 

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Duncan Truro
on February 14, 2012 - 10:41am

How does the EU propose to use funds derived from ETS to benefit the planet, rather than the EU itself?

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