International Airline Group and easyJet in no rush to pass on EU ETS charges as they reveal costs in latest accounts
Mon 14 May 2012 – Whereas some major international airlines flying to Europe like Delta, American, United, US Airways and Qantas have already added specific surcharges to their European routes to cover their EU ETS costs, apart from Ryanair, the larger EU carriers have yet to declare their hand. However, with the scheme now in operation and carriers already purchasing permits to cover the anticipated shortfall in their 2012 emissions permit requirements, the costs are finding their way onto airline balance sheets. Two of Europe’s biggest airline operators, easyJet and International Airlines Group (IAG, the parent company of British Airways and Iberia), have both quoted EU ETS costs in their latest accounts that cover the first quarter of 2012. Both though remain reluctant to spell out when, and by how much, they intend to pass on the costs to customers.
Reporting on results for the six months ended 31 March, Europe’s second biggest low-cost carrier easyJet said that having received an expected free emissions permit allocation of around 74% of its requirement for calendar year 2012, it has already completed forward purchase of permits to cover the remaining requirement. Consequently, said the carrier, it expected the cost of the EU ETS for the current financial year (up to 30 September) to be approximately £7 million ($11.3m).
Although continuing to make losses, easyJet increased revenue by 15.7% during the six months to over £1.46 billion ($2.36bn) and carried 25.2 million passengers during the period, an increase of 5.4% over the previous year. The carrier carried nearly 55.5 million passengers in 2011 so if the same numbers were repeated in 2012, the EU ETS cost on a per passenger basis would work out at around 13 pence ($0.21 or €0.16).
Despite the minimal cost, an easyJet spokesperson told GreenAir that it would have to be passed on to the customer but wouldn’t elaborate on when and by how much. However, with rival Ryanair already charging passengers €0.25 per flight, easyJet is expected to at least match this.
The carrier still remains supportive of the EU scheme. “It is not only the most environmentally effective way to take account of the impact of aviation emissions on climate change but also a much better approach than local taxes such as Air Passenger Duty, which simply punish the consumer without helping the environment,” said the company’s financial reporting statement. “EasyJet is fully compliant with ETS and continues to limit its environmental impact by reducing fuel burn. EasyJet flights consume 22% less fuel per passenger than other airlines.”
In its accounts for the first quarter of 2012, IAG has included for the first time €15 million ($19m) to cover EU ETS charges it has incurred. The charges are included in the €1.4 billion fuel costs incurred by BA and Iberia in the three months January to March, an increase of 24.9% over the same quarter in 2011 and largely responsible for the loss suffered by the airline group. The two airlines carried just under 11.4 million passengers during the period, a small decrease on 2011.
An IAG spokesperson told GreenAir that a decision had yet to be taken on EU ETS pass-through to customers. “We will keep a careful watch on the extra costs which the start of ETS will bring and what effect it will have on our business,” she said.
“Although we see the EU scheme as a potentially important element in reducing emissions, we believe a global issue requires a global solution. We remain very concerned about retaliatory action from non EU states at a time when the European economy is under severe pressure.”
Lufthansa Group, which also comprises SWISS and Austrian Airlines, has not separated EU ETS charges in its latest quarterly financial report for January to March and says it is included in fuel costs totalling €1.624 billion ($2.1bn), an increase of 23.0% over the same quarter in 2011.
A Lufthansa spokesperson said the €100 million ($128m) cost of complying with the EU ETS in 2012 forecasted at the beginning of the year still remained the company’s best estimate.
The financial report reveals that the group is already recouping EU ETS costs from its passengers and freight customers through existing fuel surcharges. The spokesperson said the group would not be specific on the proportion of the fuel surcharge relating to the EU ETS but would make a clarification in 2013 when emission permits were due to be surrendered to meet its 2012 obligations.
Lufthansa CEO Christoph Franz told the group’s Annual General Meeting last week that the overall cost of the German air passenger tax, emissions trading and the night flight ban at Frankfurt Airport would exceed €700 million ($900m) this year.