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EU Emissions Tax to Cut 30% Off Airline Profits: IATA
CNBC.com | February 14, 2012 | 12:47 AM EST

The European Union’s Emissions Trading Scheme (ETS) aimed at reducing the carbon footprint of airlines, if successfully implemented, could erode more than 30 percent from the struggling industry’s profits, Tony Tyler, CEO of The International Air Transport Association (IATA), said.

“We estimate that in the first year of application it will cost the industry some $1.2 billion. Now that’s a lot of money in an industry that we forecast, if things go well, will make a worldwide profit of $3.5 billion this year,” Tyler told CNBC at the Singapore Airshow .

He adds there is a good chance costs, as a result of the scheme, could increase further over time and become a “massive drain” on airline profitability.

“The amount of energy and emission units that airlines might have to buy may be increased very significantly in the future, so costs could balloon in future years,” he said.

Under the emissions trading scheme, all airlines flying in and out of European airports must have enough carbon credits to cover the emissions of their flights. Initially, airlines will be given allowances to cover 85 percent of their emissions, but additional credits will have to be acquired through trades or purchases from other airlines or industries.

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