Airline industry blasts Germany's 'ecological air travel levy'

Germany announced a new airline ticket departure tax that it believes will raise €1 billion ($1.19 billion) annually, but the airline industry led by IATA slammed the proposal and vowed to fight it vigorously.

The tax was part of a package of spending cuts introduced by Chancellor Angela Merkel, who said Berlin needs to slash spending by €80 billion by 2014 to alleviate the nation's shaky fiscal situation. Few details were provided on the departure tax, described by the German government as an "ecological air travel levy." It will be in place until aviation is included in the EU's Emissions Trading Scheme beginning in 2012, the government said.

"It's a cash-grab by a cash-strapped government," IATA DG and CEO Giovanni Bisignani proclaimed at the organization's AGM in Berlin. "Painting it green adds insult to injury. There will be no environmental benefit from the economic damage caused...The proposal should be axed as it is the wrong measure at the wrong time."

Lufthansa said the new tax came as a complete surprise. "We don't yet have the exact details, but we will react strongly," Chairman and CEO Wolfgang Mayrhuber told reporters at the AGM. He said a "rough calculation" led LH to "estimate the tax will be between €8 and €16 per passenger. There is no way we can pass this on to the customers." He predicted that the tax will drive passengers to use airports in other countries. "It's evident that passengers will avoid Germany," he said. "There will be lost traffic, lost value."

The German Airports Assn. warned that air traffic in Germany could drop by as much as 3% owing to the tax. The International Air Carrier Assn. said the tax is "totally inappropriate at a time when airlines need support from governments." DG Sylviane Lust said, "the German government [should] reconsider urgently its proposal" and criticized the "worrying trend for governments to misuse the green label as a way of making money that does nothing for the environment."