Global Airline Profits & Emissions in the Spotlight

Global airlines are spelling out the cost of a whirlwind of disasters, political unrest and high oil prices, while mounting an all-out offensive against European plans to make them pay extra for carbon emissions. The International Air Transport Association (IATA), whose airlines carry more than 90% of global air traffic, may be forced to cut its benchmark forecast for 2011 industry profits at a major annual gathering in Singapore this week. Meanwhile, Virgin Australia continues its strong commitment to minimising its impact on the environment with its carbon neutral certification which has received Australian Government approval through the National Carbon Offset Standard (NCOS).

By Reuters (5 June 2011):

Global airlines will spell out the cost of a whirlwind of disasters, political unrest and high oil prices on Monday while mounting an all-out offensive against European plans to make them pay extra for carbon emissions.

The International Air Transport Association, whose airlines carry more than 90 percent of global air traffic, may be forced to cut its benchmark forecast for 2011 industry profits at a major annual gathering in Singapore.

It is the latest sign of concern that the economic rebound that pulled many companies out of financial trouble in 2010 may be screeching to a halt. Such fears reflect Japan’s earthquake, recent instability in the Arab world and a rise in oil prices.

IATA most recently predicted an industry-wide profit of $8.6 billion in 2011 after a $16 billion surplus in 2010 — a year in which the economy had seemed to be recovering quickly.

Although drastic cost cuts and a tight lid on capacity appear to have prevented the industry from plunging back into the red, most analysts say the current forecasts are too optimistic.

The industry’s outlook is often seen as a guide to the strength of cyclical performance in developed markets and growth in emerging economies, which rely heavily on air transport.

Airline chiefs arrived at the conference sounding off against European Union plans to curb emissions from aviation, which they say would threaten their recovery and discriminate against carriers located the farthest away from Europe.

The EU plans will require all airlines flying to Europe to be included in an Emissions Trading Scheme (ETS) from January 1.

The system forces polluters to buy permits for each metric ton of carbon dioxide they emit above a certain cap.

The plan is meant to tackle growing emissions from the $500 billion aviation industry, which is responsible for about 2 percent of mankind’s greenhouse gas pollution.

Airlines say it will only increase costs and add to pressures caused by a faltering global economy.

Warning of trade conflict

Governments and airlines have been piling on pressure, some describing the forced inclusion of global airlines as illegal.

“The last thing that we want to see is a trade war,” said Giovanni Bisignani, director-general of the International Air Transport Association. The EU had to heed a “growing chorus of countries strongly opposing an illegal extraterritorial scheme.”

European airlines and Airbus have written to the European Commission warning of a “trade conflict with the world’s most powerful economic and political players,” over the plans that are opposed by the United States and China.

The letter, signed by Airbus Chief Executive Tom Enders and Virgin Atlantic Chief Executive Steve Ridgway on behalf of European airlines, says the measures are perceived as a tax.

U.S. airlines are challenging the move in EU courts.

Industry and diplomatic sources say China has threatened retaliation against European airlines and planemaker Airbus if the EU goes ahead with its plans.

But Europe’s climate chief insisted on Sunday the EU would stand firm against any threats of retaliation.

“When some parties start to threaten specific European companies, I think Europe should be very firm,” Climate Commissioner Connie Hedegaard told Reuters in Brussels.

The EU has offered to exempt airlines of countries that can prove they are taking equivalent steps to cut emissions.

Airlines are meanwhile involved in a growing number of bilateral trade disputes over access rights as Gulf airlines seek markets for planes such as Airbus A380s that they have ordered.

Also from Reuters:

Europe’s climate chief struck a defiant note in an escalating row over moves to make airlines pay for carbon pollution, saying Brussels would not cave in to threats of trade retaliation.

From January 1 next year, the EU will require all airlines flying to Europe to be included in the Emissions Trading Scheme (ETS), a system that forces polluters to buy permits for each tonne of carbon dioxide they emit above a certain cap.

China’s aviation authority opposes the measure, saying it will cost Chinese airlines 800 million yuan ($123 million) in the first year and more than triple that by 2020.

Industry and diplomatic sources have said China threatened retaliation against European airlines and French planemaker Airbus if the EU goes ahead with its plans.

“When some parties start to threaten specific European companies, I think Europe should be very firm,” Climate Commissioner Connie Hedegaard told Reuters in an interview.

“Now is not the time to get nervous over legislation that has already been agreed,” she added. “This was agreed by all 27 EU member states, by the European Parliament and by the European Commission.”

The aviation industry is worried the dispute will result in trade conflict and retaliatory measures, both from China and the United States, which has also voiced its opposition.

The U.S. industry group Air Transport Association of America is challenging the move in EU courts.

The row over inclusion of aviation emissions in the EU scheme is likely to flare up at the June 5-7 annual meeting of the International Air Transport Association in Singapore. The association is the aviation sector’s main trade body.

Hedegaard said it was vital to act on aviation emissions after years of rhetoric from the industry, but little action. “We cannot accept a global sector that says — let’s wait for another 5 or 10 years, because we still can’t reach an agreement.”

Having taken the decision to act, Europe must now apply its laws evenly across all airlines using European airspace, regardless of their origin.

She also noted that the cost of emissions permits translated to around 8 euros ($11.70) per passenger on an international flight, a small amount compared to some airport taxes, such as New York at around $16.

“It’s very important we do not just target European companies with the ETS,” she said. “And why should a Chinese businessman be exempt on a flight from Beijing… if a European student flying from Scotland to Germany to visit their parents is not?” she said.

She also held out the offer of a compromise — a provision in the laws that allows Europe to exempt airlines from countries that are taking “equivalent” steps to curb greenhouse gases from aviation.

“If you have equivalent measures of your own, you can be exempted,” she said. “We can see in the Chinese press that they’re working on that. We’re looking at that to see — is that what we can call an equivalent measure?”

The European Union has told Chinese airlines they can win an exemption from the EU’s carbon market if China takes carbon-cutting steps from aviation, according to a letter seen by Reuters on Sunday.

Source: www.eco-business.com

Virgin Australia’s industry-leading carbon offset program certified to national standard

1 June 2011:

Virgin Australia continues its strong commitment to minimising its impact on the environment with its recent Carbon Neutral certification.

Virgin Australia’s carbon neutral certification has again received Australian Government approval through the National Carbon Offset Standard (NCOS).

The Carbon Neutral initiative is a voluntary certification scheme which allows Australian businesses to measure, reduce and offset greenhouse gas emissions associated with business operations or products.  This Government initiative is delivered by Low Carbon Australia which acts as an independent accreditation body.

In 2007 Virgin Australia was the first airline in the world to receive Government endorsement to offer a low carbon scheme by giving its clients the opportunity to offset the carbon emissions of each flight taken.

As part of its corporate sustainability strategy Virgin Australia offers Guests the opportunity to offset their carbon emissions related to each flight they take with all of its airlines, including Virgin Australia, V Australia, Pacific Blue and Polynesian Blue.

A Guest can offset the carbon emissions from their flight in two ways, by selecting the carbon offset option that appears during the online booking process or at any time by selecting the carbon offset button on the company’s home page.

“Virgin Australia has led the way in providing the opportunity for its clients to fly carbon neutral by offsetting their own share of flight emissions.” says Meg McDonald, CEO of Low Carbon Australia.

As the flying public’s understanding of climate change as evolved, Virgin has continued to give its clients a simple way to offset individual flights,” she said.

Virgin Australia Group Executive of Corporate Advisory Merren McArthur said: “At Virgin Australia, we take our commitment to minimising the environmental impact of our operations very seriously and we have a comprehensive strategy in place to ensure the sustainable operation of our business”.

“Offering our Guests the opportunity to offset the carbon emissions related to their flights is an important part of this strategy.

“We are very pleased to receive Australian Government approval through the National Carbon Offset Standard (NCOS) as it means our Guests can continue to have confidence that their flights are offset with genuine carbon abatement”, Ms McArthur said.

The offsets used by Virgin Australia are generated from projects that are accredited under the Voluntary Carbon Standard (VCS) and are NCOS CN compliant. Projects currently include a renewable energy (biogas) project in Thailand and a fuel-wood saving project in Cambodia.

The Carbon Neutral Program is administered by Low Carbon Australia on behalf of the Australian Government Department of Climate Change and Energy Efficiency.

The Carbon Neutral Program commenced on 1 July 2010 as a successor scheme to the Australian Government’s Greenhouse Friendly(tm) initiative.

Virgin Australia group of airlines (incorporating Virgin Australia, V Australia, Pacific Blue and Polynesian Blue)

Source: www.lowcarbonaustralia.com.au and www.virginaustralia.com/carbonoffset/