In the past several weeks, there has been a spirited debate (read criticism) regarding the implementation of an unpopular new law that will tax airlines who operate to and from Europe. The tax will be in the form of permits that carriers will have to buy if they exceed their emission allowance as determined by the law. This law applies to all carriers, including cargo haulers such as FedEx and UPS.

Under the new European carbon tax scheme, it is forecast that fares on bookings between Europe and the US can go up as much as $50-$100 per round trip ticket. In many cases, that represents roughly a 10-20% hike on fares currently available on most US and European based carriers.

The law is set to go into effect on January 1, 2012 after the European Court of Justice rejected appeals and ruled the law as valid and constitutional. The intent of the law is to force carriers to operate more efficiently and to spur the development of more efficient fuels and aircraft. In my opinion, I think this law will have an opposite effect as it will dampen airline profitability and thus reduce funds available to purchase new and more efficient technology. With a fare hike of this magnitude, we can expect passenger demand to fall, which would in turn lead to airlines reducing capacity on routes to Europe.

Airlines for America, A US based airline industry group forecast that this tax alone could cost US carriers $3.1 billion over the next 8 years. The group also expects this cost to be almost fully passed on to the passenger since airlines are not in a position to absorb such a spike in operating costs themselves.

Here’s the funny part in all of this. NONE of the revenue collected by the EU as a result of this tax is required to go for environmental causes in Europe. In essence, it is a “general obligation” revenue that can be applied where ever the EU deems necessary.

If you haven’t been living in an Igloo in the middle of the Amazon lately, you see every day the tight rope Europe is walking to avoid economic armageddon. Does the EU really think that we believe that tax revenue will go help improve the environment and help fund research for more efficient technology?

I suspect the US based traveler is being manipulated into raising over $3 billion dollars to help Europe pay for its economic woes and negligence. If you are an American citizen, don’t worry, everyone else in the world is also being asked to chip in and help bail out Europe by being subjected to this tax. In another manipulative twist within the law, it states that this tax would not apply to carriers based in countries who adopt similar legislation. To me that sounds like a blatant attempt by the EU to influence policy in other countries which I don’t think will receive a favorable response by anyone.

By the way, if you were looking at booking travel to Europe, you may seriously want to consider booking your tickets before January 1 to avoid any potential exposure to higher fares based on the law going into effect.

Would love to hear what you think about all of this…….

BoardingArea