Airlines reject the deal of the century

T&E's Bill Hemmings writes in the Financial Times on behalf of the International Coalition for Sustainable Aviation (ICSA), 13 April 2011:

Sir, Jeff Smisek, chief executive of the newly merged United and Continental Airlines, balks at the thought of paying his share of the estimated €1.1bn cost of the aviation sector joining the European Union’s emissions trading scheme from next year (“United warns EU on carbon rule”, April 4).

Let’s do a quick sum. If you divide €1.1bn by the 90bn litres of kerosene that fall under the scheme, you get 1.2 cents a litre. That is 40 times less per litre than the 48 cents tax road transport pays, on average, for petrol and diesel in the EU. As aviation currently pays no fuel tax, no value added tax on tickets and nothing for its climate impact (which is 5 per cent of the global total according to the latest science, not the 1-2 per cent figure the FT quoted), the sector is getting the deal of the century. But amazingly, Mr Smisek wants an even better one and is willing (along with other US, and Chinese airlines) to go to court to get it.

In an age when governments everywhere are in need of new sources of revenue, Mr Smisek might reconsider whether drawing further attention to his industry’s massive tax subsidy is such a smart plan.


This follow-up letter was published on 15 April 2011:

Subsidy of airlines is well known

Sir, How odd that Ulrich Schulte-Strathaus of the Association of European Airlines says that “airlines and their customers pay, in full, for their infrastructure” as his first defence against the suggestion that airlines benefit from a massive tax subsidy (Letters, April 13).

If that is the case, you have to wonder why, as the FT reported last week, the European Commission has just announced a wide-ranging review of state aid to airlines and airports (“Aviation sector aid under EU scrutiny”, April 7). In 2006, Lufthansa (who should know) estimated state aid to airlines in Europe since 1991 was worth €20bn. And there’s been plenty more since then as governments across the continent have rushed to subsidise new regional airports and new routes, with the European Commission cheering them on.

Meanwhile airlines have benefited from subsidised aircraft thanks to billions of euros of government support in the form of cheap loans and direct subsidies to Airbus and Boeing: the icing on the cake.