A million thanks to Frequently Flying for retweeting this breaking news!!!

In tomorrow’s news from Air Transport World, it seems the first casualty has been suffered on the battlefield. China has denied Lufthansa landing rights for it’s A380 service to Shanghai. Lufthansa’s CEO Christoph Franz shared his perspectives and disappointment when he addressed the European Aviation Club in Brussels. You can read his comments throughout the article that I attached below.

This is the first real volley in what had been mostly a war of words until now. China has threatened all along not to abide by the EU’s scheme to tax airlines who exceed pollution quotas. Previously they had balked on aircraft orders from Airbus, but now they are getting a bit more personal with a direct strike on Lufthansa. Look for LH not to take this sitting down.

To get caught up on what’s been happening with this on going debate, you can read my recent post about it here where I talk about how this tax scheme can actually ruin an industry.

Here is the Air Transport World Article:

China’s opposition to the European Union’s Emission Trading Scheme (EU ETS), has prevented Lufthansa (LH) from obtaining rights to operate an Airbus A380 to Shanghai, LH chairman and CEO Christoph Franz said.

“The EU ETS is further increasing the already distorted level playing. We [the European airline industry] cannot accept retaliatory measures against the EU ETS in whatever form, landing rights or other. Some days ago, Lufthansa once again did not get the authorization to use an A380 to Shanghai,” Franz told the European Aviation Club in Brussels Tuesday.

“Listening and nodding is not enough,” he warned European regulators. “We are in favor of a global solution [under ICAO]; however, in the meantime there is distortion. This distortion has started for Lufthansa in the second half of 2011 when we started hedging and buying CO2 certificates. We are trapped in a corner,” he said.

LH has said it will have to buy at least 35% of the ETS certificates it needs this year and has estimated the ETS cost on group level this year at €130 million ($171.4 million). It decided to pass on this cost to the passenger and include it in the fuel surcharge.

Franz slammed regulators for not addressing other market distortions and for not creating the right regulatory framework for European network airlines to thrive. “There are some indications that [European Commission’s] DG Competition will analyze subsidies to low cost carriers. It is a scandal that Ryanair receives €18 support per passenger at Charleroi airport (CRL) while Brussels Airlines [in which LH holds 45%] has to pay €26 in passenger duties and taxes at Brussels airport, which is just 45 km away [from CRL].”

He also criticized the inability of European and national authorities to deal with the massive influx of capacity by airlines from the Arabian Gulf states. LH offers some 7,000 weekly seats from Germany, which has 82 million inhabitants, to the Gulf states, whereas the airlines from the Gulf states, which have 6 to 7 million inhabitants, offer 38,000 seats to Germany, Franz said. “This is real distorted market access, today. This is not a forecasted situation for tomorrow. This has to be addressed through bilateral agreements because air transport is not part of the WTO and thus the normal instruments of addressing such market distortions are not there.”