12 Jul 2011

Carbon tax adds to airline costs

7:31 am on 12 July 2011

Airlines are counting the cost of Australia's proposed carbon tax.

Virgin Australia, in which Air New Zealand has a 15% stake, estimates the proposed carbon tax will cost it an extra $A45 million each year.

Qantas, which has two-thirds of the domestic market across the Tasman, says the carbon tax will cost it an extra $A115 million each year.

Air New Zealand does not fly domestic routes in Australia and is not affected by the Australian scheme which will tax carbon dioxide emissions at $A23 a tonne from 2012.

However the airline would be affected by European Union plans to charge airlines flying to or from Europe for 15% of the carbon emissions they produce during the entire flight.

The Centre for Asia Pacific Aviation's chairman Peter Harbison says will have a substantial impact on the likes of Air New Zealand and Qantas which fly from the antipodes. He says it could mean a $100 million-a-year bill for Qantas.

Mr Harbison says airlines are struggling to turn a decent profit, and will have to risk losing passengers by passing

on such costs.

The Air Transport Association (IATA) is supporting American airlines' legal action against Europe's climate change policy saying its plan to impose a charge for emissions breaches international law.