International Consolidated (LSE:IAG)
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Major European airlines Thursday renewed their criticism of the European Union's inclusion of the aviation industry in its carbon-dioxide emissions trading scheme, views echoed by Airbus, the Franco-German maker of passenger jets, which China has singled out for retaliation as other foreign countries have also objected to the move.
"It's crazy to risk a trade war because of the position the EU has adopted," Willie Walsh, chief executive of International Consolidated Airlines Group (IAG.LN), the parent company of British Airways and Iberia, said after a meeting of the 34-member Association of European Airlines.
AEA Chairman Bernard Gustin said the EU was "arrogant" in it approach. "I think it's not a strong word in this sense: Europe wanted to lead the way--without listening," Gustin said.
The ETS, which obliges EU and non-EU airlines to buy carbon emission allowances when they fly into EU airports or through EU air space, has provoked an outcry from non-EU countries over what they consider to be a unilateral tax. The Chinese government has put on hold a plan for Chinese airlines to buy 45 Airbus aircraft to signal its unhappiness over the ETS.
"We agree with the frustrations of the Chinese airlines and the Chinese government [because] it is very strange that the EU has decided to tax carbon consumed over China," said John Leahy, Airbus Chief Operating Officer, Customers, during a briefing at the aircraft-maker's headquarters in Toulouse in southwestern France.
"I can only imagine what the EU's reaction would have been if China had tried to put a tax on European airspace," Leahy said.
But the European Commission said Thursday that the industry is protesting too much.
"Let's get the proportions right. In this debate the aviation industry at times seems to imply we are talking about enormous sums of money per ticket," said Isaac Valero-Ladron, a spokesman for Climate Action Commissioner Connie Hedegaard.
"And the truth is that the increase [for passengers] is less than the cost of a cup of coffee at the airport. Instead of criticising the system, it would be wiser to spend all this time and energy in helping the EU get the long-awaited global agreement in [the] ICAO," said Valero-Ladron. The International Civil Aviation Organization is a Montreal-based agency of the United Nations.
"We've nothing against the principle of the emissions trading scheme which is an incentive to contain emissions," Airbus second in command Fabrice Bregier said. Bregier noted the industry's goal is to keep global airline emissions stable while airline passenger traffic is set to continue rising at an annual rate of 4% to 5%.
"But the ETS has to be discussed and negotiated at the global level, " he said. "The EU has started in this direction, and Airbus hopes it moves faster toward a global solution," Bregier said.
Despite the outcry by more than two dozen countries including the U.S., China, Russia and India, over the ETS, only eight Chinese airlines and two from India have refused to submit 2011 emissions data to Brussels, out of the 1,200 carriers that fly in and out of Europe.
Still, the clock is ticking on governments negotiating to find a solution, because airlines will have to start paying for their emissions in April next year, leaving just about one year to solve an issue on which positions have become more extreme in recent months.
The diplomatic spat over ETS comes at a sensitive time for Airbus as it discusses the future of its Tienjin factory with its Chinese partners. The agreement that led to the opening of the facility in 2008 expires in 2016 and must be renegotiated.
"It is a springboard for further investments in China, which is one of the biggest markets in the world after the US," Bregier said.
-By Alessandro Torello, David Pearson, and Bart Koster; +32 (0)2 741 14 88; Alessandro.Torello@dowjones.com