New Carbon Tax Means Fare Hikes

Last week, the European Court of Justice (EJC) rulled against a legal challenge by U.S. Airlines to prevent the European Union from implementing a tax on carbon emissions by airlines using European airspace.

What this means for you is actually pretty significant. In the future, the airlines are going to have to pass along the costs to you, the traveler, in an effort to stay in the air. Airlines have been struggling over the last 10 years to save costs, and governments have been pulled in on several occasions to bail them out. We are demanding customers. We want the cheapest rates, and the best service, and airlines are having a difficult time keeping up.

This new tax is estimated to add nearly a billion dollars in fees in 2011 alone and up to 4 billion per year in 2020. What will the exact increase in prices be? We’ll have to see in the upcoming months, but it is likely going to be seen across the industry as a whole. Airlines that serve the EU on a few flights will likely pass along the costs to all flights, even those that do not fly into the EU. For those companies inside the EU such as Lufthansa, Ryan Air, British Airways, and others, they will likely see more siginificant travel costs.

Lufthansa has openly said that this fee will cost them almost 170 million in 2012 alone. Thats quite a hike.

The International Air Transport Association (IATA) is agains this fee hike, but has little say in the matter after the EJC ruling.

The US House of Representatives, India’s Aviation Ministry, the Chinese government, and Russian governments, have all opposed the EJC ruling calling it “a direct infringement on the sovereignty” and have threatened retaliative actions. 14 U.S. carriers “will comply under protest” which is a simple way of saying ‘screw off, but we have no choice’.

It should be interesting following how this plays out over the next couple of months, but do expect to be paying a bit more for anything going in or out of Europe in the coming months.