Aviation chiefs ask EU leaders to halt carbon row

PARIS/BRUSSELS Mon Mar 12, 2012 12:27pm GMT

An A380 aircraft is seen through a window with an Airbus logo during the EADS / Airbus 'New Year Press Conference' in Hamburg January 17, 2012. REUTERS/Morris Mac Matzen

An A380 aircraft is seen through a window with an Airbus logo during the EADS / Airbus 'New Year Press Conference' in Hamburg January 17, 2012.

Credit: Reuters/Morris Mac Matzen

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PARIS/BRUSSELS (Reuters) - European aviation bosses have urged political leaders to stop an escalating global row over an EU carbon levy, warning it is seriously threatening their industry.

Airbus EAD.PA CEO Tom Enders said that China -- at the forefront of opposition to the EU Emissions Trading Scheme (ETS) - had suspended orders for aircraft worth $12 billion (7 billion pounds), putting at least 2,000 positions at risk.

Alongside Enders, eight chief executives of airlines and engine makers wrote to the leaders of Britain, France, Spain and Germany saying they expected "suspensions, cancellations and punitive actions to grow as other important markets continue to oppose ETS".

"The aim must be to find a compromise solution and to have these punitive trade measures stopped before it is too late," the CEOs wrote in the letter, seen by Reuters. "We have always believed that only a global solution would be adequate to resolve the problem of global aviation emissions."

All airlines using EU airports must pay to offset their carbon emissions under a new law that took effect in January. The carbon cost for a flight from China to Europe is around 2 euros per passenger but as the scheme is being phased in gradually, airlines will not face a bill until April next year.

In addition to Airbus, the signatories included the heads of airlines British Airways and Iberia, owned by International Airlines Group (ICAG.L), Air Berlin (AB1.DE), Air France (AIRF.PA), Lufthansa (LHAG.DE) and Virgin Atlantic VA.UL.

The heads of French and German aircraft engine makers Safran (SAF.PA) and MTU Aero (MTXGn.DE) also signed the letter.

In a separate letter to European Commission President Jose Manuel Barroso, Enders deplored the "very serious situation" caused by the threat of reprisals from China and other nations.

"It seems that these threats are now becoming very real and are being translated into concrete action, which is starting to have serious consequences on the European aviation business," he wrote in his letter, also obtained by Reuters.

GLOBAL SOLUTION

The European Commission said it was forced to act alone after the United Nations' International Civil Aviation Organization failed to come up with a viable global scheme. It has said it will modify its law if the ICAO, which has stepped up work on its own system, comes up with a scheme.

On Friday a meeting of environment ministers from all 27 EU nations reiterated they were fully behind the EU scheme.

European Climate Commission Connie Hedegaard said "nobody would be happier than the European Union" if ICAO could deliver a solution that was at least as good as the EU one.

"We have been fighting for that since 1997," she told Reuters last week. "We are working very hard internally with ICAO."

China, the world's fastest-growing airline market, is a major purchaser of both Airbus and Boeing (BA.N) jets.

It tends to buy in large quantities, through a central purchasing entity, before the jets are allocated to individual airlines, but final Beijing government approval is needed before the aircraft can be delivered.

China is developing its own medium-haul passenger jet, the C919, but aviation analysts say the country will need more imported planes than either Boeing or Airbus can deliver for the foreseeable future.

Non-governmental organisations accuse the companies of making empty threats.

"Just days ago, Airbus reported booming profits for last year so it's hard to see this so-called threat playing out in reality," said Bill Hemmings, programme manager at environmental group T&E.

"As Airbus are in the business of making more efficient planes, they should be smart enough to see that this policy will drive the market in a direction that helps them sell more planes, not less."

Critics of the EU's plans say they do not just affect profitability, but touch on national sovereignty, making the risk of a trade war that could disrupt air traffic more serious.

The aviation industry has been touched by a number of thorny disputes between China and the West, particularly whenever arms are sold by the United States or Europe to Taiwan.

(Additional reporting by Tim Hepher and Tom Miles in Geneva and Stephen Mangan in London; Editing by Sophie Walker)

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