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Flight tax plea as aviation bosses fear rough landing

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Bosses of Airbus, major European ailines and aviation firms warned European countries' leaders that the EU's emission trading scheme may lead to serious consquences for the region's aviaiton industry. [File photo]

The heads of Airbus, leading European airlines and aviation companies have written a letter to Europe's political leaders urging them to resolve an escalating trade spat over the EU carbon charge.

The letter was sent to the prime ministers of Britain, France and Spain and Germany's chancellor, according to a statement released on Monday by Airbus.

The nine signatories warned in the letter that retaliation by China and other countries that oppose the EU Emissions Trading Scheme (ETS) was leading to serious consequences for the region's aviation industry and imperiled thousands of jobs.

"Europe can ill-afford the situation in the current economic climate," the company chiefs wrote in the letter.

China suspended approval this month for $12 billion worth of Airbus orders, Airbus confirmed earlier. The company estimates that the suspension could jeopardize more than 1,000 Airbus jobs in Europe and at least another 1,000 in the supply chain.

Airbus spokesman Stefan Schaffrath said his company is seeing "retaliation threats" from 26 countries, "in particular from China", the Associated Press reported on March 8.

The suspended orders include 35 for A330 planes and 10 for A380, the superjumbos, Schaffrath said.

The Wall Street Journal reported on Monday that China's new ambassador to the European Union, Wu Hailong, said it "makes sense" for Chinese airlines to shun aircraft made in Europe, owing to the EU tax on aircraft emissions.

Wu told reporters that a decision by the EU to make non-European airlines subject to the tax "contributed to the current dilemma," the newspaper said.

The main competitor to Airbus, which has important interests in the Chinese market, is the US group Boeing.

Luo Zhuping, board secretary of China Eastern Airlines, said the company's commercial needs will determine whether it will continue to purchase Airbus jets.

"That depends. The decisions are business-oriented," Luo said in an interview with China National Radio on Monday.

When asked whether the corporation will freeze or cancel its current orders for Airbus jets, Luo was non-committal.

"We did not say that we will break the contract, nor did we say we will not carry out the orders," he said.

The EU has imposed a carbon tax on airlines with effect from Jan 1, but no carrier will face a bill until 2013 after this year's carbon emissions have been calculated.

The EU has said the tax will help the 27-nation bloc achieve its goal of cutting carbon emissions by 20 percent by 2020 and that it will not back down on the plan.

The Chinese aviation authority released a notice in February to stop all Chinese carriers paying the tax, except with the government's permission.

A total of 29 countries, including China, the US and Russia, signed an agreement on Feb 24 objecting to the tax.

The nine company chiefs expect the "list of suspensions, cancellations and punitive actions to grow as other important markets continue to oppose the ETS".

They called for urgent talks at EU Council level, the Airbus statement said.

The government and business insiders noted the contents of the letter.

"The voice from inside the EU shows that the law is really not convincing," Chai Haibo, deputy secretary-general of the China Air Transport Association, told China Daily on Monday.

"Now it's time for the EU to reconsider the law's legitimacy."

The ETS will place a heavy burden on Chinese airlines.

China's aviation industry will have to pay about 800 million yuan ($126 million) in extra costs annually for the system, according to current standards and this will reach 18 billion yuan annually in 2030, according to Li Jiaxiang, minister of the Civil Aviation Administration of China.

Frank Puettmann, a spokesperson for Lufthansa, told China Daily that the impact of the current ETS on Lufthansa would be very strong. "Judging by the average trend in certificate prices, Lufthansa expects to incur additional expenses of 130 million euros ($171 million) in 2012," he said.

Civil aviation authorities in many countries, as well as governments, have also expressed objections to the ETS.