China’s airline association said it “totally opposes” the European Union’s plan to include aviation in a carbon-emissions program after European carriers said the initiative may prompt trade conflict.
The EU plan is “unreasonable and illegal,” Chai Haibo, vice president of the China Air Transport Association, said today in Singapore. “Our group totally opposes it.” China’s big three state-controlled carriers all belong to the group.
European airlines and Airbus SAS said in a May 24 letter to the European Commission that including aviation in a wider cap- and-trade system due to start Jan. 1 may prompt retaliatory measures from China and the U.S. The program may also boost costs for airlines struggling with a rise in fuel prices that contributed to the International Air Transport Association today cutting its 2011 industry profit forecast by 54 percent.
“This is not a good thing as airlines are very fragile,” said Zhao Xiao Song, senior vice president at China Southern Airlines Co., Asia’s biggest carrier by passenger numbers. “How would you like it if China also charged a similar tax?”
The carbon tax and higher air fares may also damp European growth and deter Chinese tourists from visiting the region, he said.
U.S. challenge
U.S. carriers including United Continental Holdings Inc. (UAL) have begun a legal challenge against the carbon plan. They will argue July 5 at the European Court of Justice in Luxembourg that the bloc’s inclusion of carriers in the market exceeds its jurisdiction and amounts to an improper tax or charge, according to the Air Transport Association of America.
“We fully expect other states to retaliate,” Willie Walsh, the head of British Airways parent International Consolidated Airlines Group SA, said today in Singapore, which is hosting the annual general meeting of the International Air Transport Association. “That’s damaging to the industry and of great concern to all airlines.”
Under the EU’s plan, airlines will be given a set amount of emissions allowances industry wide. Carriers will get 82 percent of these for free, with another 15 percent offered at auction. The rest will be held in reserve. Airlines will have the second- highest amount of allowances after power generators. Walsh said he favors only using the system on flights within Europe initially.
European protests
The Association of European Airlines and Airbus said in the May 24 letter to Climate Commissioner Connie Hedegaard that “retaliatory measures” following the plan would probably target the region’s carriers and the planemaker. A copy of the letter, signed by Steve Ridgway, the chairman of the airline group and Airbus Chief Executive Officer Tom Enders, was obtained by Bloomberg News.
The European legislation offers an option to exclude incoming flights from non-EU countries if the nation implements “equivalent” measures to cut aviation pollution.
Cathay Pacific Airways Ltd. (293) Chief Executive Officer John Slosar said governments should create a single global system to prevent multiple different charges being imposed on the same flight.
“You could end up with a patchwork,” with the same emissions being covered by different programs, he said.
IATA today said that airlines may make profits totaling $4 billion worldwide this year, compared with an earlier forecast of $8.6 billion. The group cut its estimate because of higher oil prices and travel disruptions caused by the Japan earthquake and political protests in the Middle East and North Africa.
