Lufthansa warns EU scheme to raise fares

Mon Jan 2, 2012 5:34pm EST
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By Maria Sheahan and Tim Hepher

FRANKFURT/PARIS (Reuters) - Germany's Lufthansa told passengers on Monday to brace for higher ticket prices as it refuses to shoulder the costs of a carbon trading scheme at the centre of a brewing trade spat.

The world's second largest long-haul carrier after Dubai's Emirates said it faced 130 million euros ($169 million) in extra costs this year and became the first major operator to announce possible surcharges since the EU scheme took effect on January 1.

The increases will not go into effect straightaway.

Under plans to tackle climate change, airlines touching down or taking off in the 27-nation European Union and three neighbouring nations must account for their CO2 emissions as part of an expansion of the world's largest carbon market.

The United States, China, India and others have attacked the scheme on the grounds that it infringes their sovereignty and that the EU should not act alone. Some have warned of counter-measures, firing talk of the world's first carbon trade war.

The EU says its Emissions Trading Scheme, which already applies to other industries, is the fairest way to cope with aviation's contribution to global warming and cuts through years of inconclusive efforts to come up with a worldwide alternative.

Analysts say Lufthansa is among the airlines most affected by the scheme, along with other European network rivals British Airways owner IAG and Air France-KLM or United Continental and Singapore Airlines.

Germany's biggest airline said it would add the costs from the EU's Emissions Trading Scheme to its existing fuel surcharge, becoming the first carrier to provide details of how it plans to cope with the additional burden.   Continued...