Aviation: EU travel bargains before prices rise

Robert Malina, the lead author of a paper published in the Journal of Air Transport Management from the Massachusetts Institute of Technology says that US-based airlines could get away with sliding as much as USD2,600 million in the next ten years by marking up emission charges beyond what is actually needed to cover costs.

The airline might have a point: this is another scheme that will be costly to administer and it makes some sense to hypothecate those additional costs into the additional charge to which they relate. Even so, the amount seems high, particularly as fuel surcharges are already commonplace on flights operated by US airlines to EU destinations.

But, compared to fuel surcharges added by Eu and Asia airlines, the US companies have adopted a toe-in-the water approach with just USD6 added to the price of a return ticket. Few consider that this low figure will remain. But EU airlines have added a similar amount, for the time being.

The emissions scheme is supposed to encourage airlines to be more fuel efficient and to trade additional allowances if they exceed a cap on their emissions.

But airline industry insiders say that the scheme is frankly stupid: if an airline could find ways to reduce their emissions - short of scrapping their fleets and buying aircraft that use less fuel - they would have already done so.

Airlines have been assessed for the emissions they require: then they have been told they can have 85% of that for free and must buy the remainder in carbon trading schemes. Carbon trading has become one of the hottest commodity desks in Europe's trading houses in the past two years.

Unlike passenger tax, the emissions scheme is based on the aircraft and any aircraft entering EU airspace has to pay, regardless of load or even purpose of flight. Therefore non-EU Airbus aircraft flying into Airbus facilities in the EU for maintenance are liable to the carbon tax.

India and China have both said that they will refuse to co-operate and the US tried to exempt its airlines from the scheme but its appeal to the EU courts failed. They say they are looking for ways to beat the system. However, a subsidy would, on the face of it, be open to challenge in WTO.

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