Emirates warns environmental taxes and the EU ETS could place its European regional routes at risk
Tue 2 Dec 2008 – International carrier Emirates says that the additional costs it will incur as a result of the EU Emissions Trading Scheme (ETS), coming on top of the imposition of “punitive” environmental taxes on plane tickets, will place a number of its European regional routes, particularly to the UK, at risk. Europe’s largest low-cost carrier Ryanair also gave notice that it would no longer continue to absorb increasing passenger taxes and will be seeking discussions with regional airports about the future viability of some routes.
“As we have been saying in our campaign against UK passenger duty, route economics and dynamics can change fundamentally when you have significant taxes and added costs like those we will see with the ETS,” Andrew Parker, Emirates’ Senior Vice President, Public and Environmental Affairs, told delegates at last week’s Emissions Trading Aviation Summit in London.
“During the ETS consultation phase, I was asked by an MEP in Brussels why we should be concerned with the addition of just a few euros on the cost of a ticket. All our modelling shows that on a typical flight from Dubai on our most popular routes to Paris, Frankfurt and London, the price we will have to pass on will be ten times that amount, closer to €30 ($38).”
Parker said that if “punitive” measures continue to accelerate, regional cities will start to lose out, particularly those in the UK like Manchester, Birmingham, Glasgow and Newcastle. “Some routes could suffer significantly,” he warned. And it’s not just the UK that is at risk, he added, naming other European non-capital cities served by Emirates.
He explained to GreenAir that part of the Emirates strategy, unlike most other international carriers, has been to develop ‘pioneer’ routes from Dubai into secondary markets, where, he says, the economics are different from those to the major hubs. He acknowledged that sometimes the seasonality or ‘thinness’ of those routes made it hard to ensure they were going concerns.
“For example, I think we are the only major international airline operating out of Newcastle,” he said. “It’s good business and people in the north of England love to avoid travelling through Heathrow. They come to Dubai for holidays or connect through to other international destinations through our efficient hub.
“We want such routes to work but our concern is that with passenger taxes and the introduction of emissions trading, the harsh realities faced by our planning and financial management could see question marks raised over certain routes.
“Aviation plays a major part in regional economies and we would just argue that a degree of caution and consideration be given to their needs. Europe is always going to have a platform of strength but I believe over time it will inherit some weakness as other markets, which will never have environmental taxes or emissions trading, become more attractive.”
Parker discounted suggestions that his airline, and Dubai itself, will be the main beneficiary of the EU ETS through carbon leakage, but accepts that market distortions could occur, which makes it even more important, he said, that a global solution on tackling aviation emissions is found.
He believes that European traffic growth over the next decade could potentially be significantly different from that predicted in European Commission and UK models, and he warned European policy makers to “tread very carefully in difficult economic times”.
Last week, Europe’s biggest low-cost carrier Ryanair condemned the UK Government’s announcement that it would be increasing Air Passenger Duty in successive years from November 2009, saying it would have a “devastating” effect on regional airports. It says that its average fare during the coming winter at regional airports is just £10 ($15) and will absorb the current £10 tax, but says it will not absorb the future increases.
It says it will enter into discussions with regional airports “about the future viability of passenger traffic and growth” and it is likely the airline will expect airports to help shoulder the added financial burden.