Airlines can’t just write off ‘fairy tales’ authored by EC

 - October 23, 2006, 10:43 AM

With fuel prices in a steep ascent, do airlines need further inducements from regulators to burn less jet-A? No, says the European Regions Airline Association in response to proposals to extend emissions trading to the air transport industry.

The past 12 months have seen ERA member airlines recovering from tough trading conditions, according to the group’s director general, Mike Ambrose, who warned that the situation will likely worsen during the final quarter of this year.

“The airlines are already under strong pressure to control costs,” Ambrose told AIN, adding that to burden them with the further expense of emissions trading would prove both redundant and harmful. “It wouldn’t be a credible plot in a Hans Christian Anderson fairy tale,” he said with his characteristic disdain for the fruits of EC officials’ labors.

But the EC is looking beyond the oil price spike of $70 per barrel of crude that followed Hurricane Katrina in late August. It views emissions trading– through which carriers would buy and sell allowances in aircraft engine emissions–as a long-term strategy for mitigating the environmental effects of ever- increasing demand for air transport.

In truth, the ERA views emissions trading as the least unacceptable of the economic mechanisms the EC could exercise. At least it provides a positive incentive to reduce emissions. Any environmental benefits that direct fuel taxes on airline tickets generate would come only at the expense of passenger demand because, according to the ERA, legislators would use the tax money to swell state coffers rather than invest it in environmental performance technology.

Emissions Trading Favored

Following the July 29 publication of an EC-commissioned report by Dutch consultancy CE Delft, emissions trading now appears favored over a fuel tax. If the EC accepts emissions trading as the way forward, as expected by the end of this year, the system could apply to aviation between 2008 and 2010. Importantly, the EC’s environment directorate, not transport officials, is advancing the issue.

In assessing the possible cost effect of emissions trading, CE Delft assumed emissions charges at rates of between €10 and €30 ($12 to $36) per metric ton of carbon dioxide (CO2). It estimated that a typical airliner would burn about eight tons of CO2 on a 259-nm flight between Amsterdam and Paris. On that basis, depending on which emissions trading system eventually sees the light of day, the operator would realize an added cost of between €23 ($27.60) and €481 ($577.20) per short-haul round trip. The consultants calculated that, depending on the degree to which airlines directly pass on emissions costs to their passengers, average ticket prices could rise by as much as €9 ($10.80) per flight.

The EU finance ministers had previously considered plans to tax either airline passengers or the airlines themselves for fuel consumption. Ticket taxes would have cost €10 ($12) for a one-way journey within the EU or €30 ($36) for a flight from inside the EU to a destination outside the EU. The other plan proposed a tax on jet-A fuel of €330 ($396) per 1,000 liters (nearly 13 cents per U.S. gallon).

While the ERA does not object to emissions trading in principle, it does harbor real concerns about how such a system would work in practice. Unlike industries subject to emissions trading under the Kyoto Agreement, air transport has yet to be assigned trading units and no one yet knows how they might be calculated.

According to ERA infrastructure and environment director Barbara Ambrose, Europe’s regional airlines could accept emissions trading as long as it applied only to CO2 emissions and not to nitrogen oxide (NoX). According to the association, NoX emissions are hard to calculate because they do not relate directly to fuel burn. Carriers would also want the ability to trade with industries outside air transport, likely a net purchaser of emissions.

The ERA also wants the EC to take a holistic approach to cutting air transport’s damage to the environment, one that would include technical measures (such as Boeing’s plans to introduce electric motors on landing gear for aircraft taxiing) and operational improvements (such as the more direct air traffic routings proposed under Eurocontrol’s Single European Sky program–see page 98). According to the ERA, the aerospace industry already spends 14 percent of its revenues on research and technology work aimed at fuel efficiency.

Unfortunately, the EC’s environmental directorate does not appear to have bought into such an approach. Along with its airline industry partners in the Committee for Environmentally Friendly Aviation (CEFA), the ERA proposed a wide-ranging emissions containment policy to the EC in May, but officials refused to allow its inclusion in the CE Delft report. However, the proposals received a more favorable response from the European Civil Aviation Conference and its curiously named committee on “the abatement of nuisances.” That body has agreed to endorse the CEFA plan at this December’s meeting of the heads of Europe’s national civil aviation authorities.

Poverty Tax Not Yet Off Agenda

Much more troubling to the ERA, as Europe’s regional carriers themselves plead poverty they still face the prospect of a new ticket tax to raise funds for supporting anti-poverty efforts in the developing world. Proposals for a so-called “poverty tax” on air transport surfaced in May during the charged atmosphere leading to July’s G8 summit of world leaders. EU finance ministers then appeared to put the plan on hold, although by early September French President Jacques Chirac reportedly sought to resurrect the idea–fueling concerns that France might introduce such a tax unilaterally in a way that would place the country’s regional airlines at a competitive disadvantage.

Mike Ambrose holds the poverty tax idea in complete contempt, characterizing it as yet another example of politicians’ singling out air transport n pursuit of a muddled agenda. He maintained that airlines could make greater contributions to alleviating poverty by providing air-lift services in the regions concerned.

For the ERA the poverty tax represents just the latest in a long line of ll-conceived European regulations untested by cost-benefit analyses. Earlier this year the association filed a formal complaint of maladministration against the EC with the European Ombudsman in reaction to the commission’s new requirements (EU 261/2004) for compensating passengers in the event of delayed or canceled flights.

The ERA has alleged that in publishing the terms for compensation, the EC has misled passengers into believing they enjoy rights for which the law does not provide. The EC failed to meet the European Ombudsman’s July 31 deadline for responding to the ERA’s charges and, as of early September, had still not made its case.

The EU 261/2004 requirements took effect on February 17, setting out tough new rules governing airlines’ obligations to compensate passengers for flight cancellations and delays. In addition to a choice between taking an alternate flight “at the earliest opportunity” (with meals and accommodation provided in the meantime, when appropriate) or full reimbursement of their ticket price, passengers get €250 ($300) for canceled flights shorter than 1,500 km (932 miles), €400 ($480) for flights between 1,500 km and 3,500 km (2,175 miles), and €600 ($720) for flights longer than 3,500 km.

Worse still, according to the ERA, the rules provide for direct flights back to the cities from which affected passengers began their journeys–on the other side of the world if necessary. ERA air transport director Andrew Clarke has estimated that just one flight cancellation in such circumstances could completely eliminate a regional airline’s profits on that route–a situation that could result in service cuts. He said that the “horrifying” new levels of compensation could force carriers to restructure the terms and conditions for through-ticketing in a way that would ultimately disadvantage passengers.

“This is a troublesome issue because most of the problems we warned the EC about have come true,” said Ambrose. According to him, the rules governing what constitutes a delay or cancellation beyond a carrier’s control are impossibly complex.

Ambrose said that the Commission has shown “an appalling lack of concern” over the effect of the rule, which, according to the ERA, owes its existence to technically flawed assumptions about the circumstances in which weather conditions might prevent a flight from taking off.

“Passengers just can’t believe that they are not actually entitled to compensation in the event of any delay,” complained Ambrose. “To have sufficient operational redundancy to avoid all delays and cancellations there would have to be two shadow airlines all the time.”

The ERA is now battling the introduction of what it regards as another piece of ill-conceived and unwarranted legislation governing the treatment of passengers with reduced mobility (PRMs in EC-speak). The association entirely endorses the EC’s view that airlines should not discriminate against PRMs by charging more for services such as wheelchairs, as low-cost carrier Ryanair has tried to do. However, it does object to the confusion it believes the new law would create over the precise responsibilities for assisting passengers and safety-sensitive issues related to emergency evacuations.

The EC’s proposed new rules call for assistance for PRMs not just from the check-in desk to the aircraft seat, but also to and from the check-in desk and the point at which the journey to and from the aircraft begins or ends (such as an airport railway station or car park). For the ERA this begs important questions about what responsibility its member airlines bear. The rules appear to make the airport ultimately liable for helping PRMs, but do not address the inherent lack of transparency over how the airports pass the costs on to airlines, effectively giving them a monopoly over such services.

Moreover, the EC insists that the new proposal would not result in additional costs. Airlines and airports fail o understand how they can provide personal escorts for passengers from outside the terminal building without incurring extra costs.

The proposed new rules also require airlines to make special arrangements for evacuating passengers with reduced mobility from aircraft in the event of an accident or emergency. The ERA argues that such a requirement could create serious practical problems and especially in smaller regional aircraft. “We cannot allow the unreasonable imperilment of other passengers and crew,” Ambrose told AIN.

The ERA has demanded a full impact assessment of the PRM proposals. It has also protested that the EC has not sought to impose comparable requirements on domestic rail services–direct competitors of many ERA carriers.

Lately, the ERA has also spoken out on the alleged failure of European Union member states to implement the EC directive requiring no-penalty safety incident reporting by airline personnel, as well as an apparent lack of objectivity in accident investigations. “Too many states investigate not to prevent future accidents, but to hand over the matter to law enforcement,” Ambrose argued. He alleged that French magistrates investigating the July 2000 Air France Concorde crash held onto key evidence in a way that impeded the investigation. He also complained about the increasingly litigious environment in Europe, insisting that a mistake by an airline should not necessarily constitute grounds for criminal liability.