News Analysis: Flying in the Face of Logic

Marketing, November 8, 2006 | Go to article overview

News Analysis: Flying in the Face of Logic


Carbon-offsetting costs and tax hikes could be the catalysts that end consumers' love of air travel.

Ryanair's combative chief executive Michael O'Leary was typically blunt last week when dismissing calls for environmental taxes on the aviation industry as the 'usual horseshit', lambasting British Airways over the fuel efficiency of its fleet and asserting that he was far too busy building his business to join a carbon emissions trading scheme.

O'Leary's forthright comments might lead one to believe that the only green concern he has is the livery of Aer Lingus, against which Ryanair recently launched a hostile takeover bid. But the climate change debate is gathering momentum and the impact of air travel on the planet is increasingly coming under the spotlight.

Last week also saw the publication of the government's Stern Review, billed as the most comprehensive assessment yet on the economics of climate change, which cautioned that delaying action on carbon emissions would be dangerous. It was no surprise that in its immediate wake came a high-profile direct-action protest by Greenpeace at the coal-fired Didcot power station in Oxfordshire.

Legislative measures

Other parties are targeting low-cost airlines and tour operators. Among them is pressure group Plane Stupid, which has vowed to subject companies including Ryanair, easyJet and Thomas Cook to greater scrutiny, claiming that emissions from air travel alone will mean that the UK misses key CO2 reduction targets.

The growing pressure is sparking change in some quarters. Virgin boss Sir Richard Branson announced in September that over the next 10 years he would commit all profits from his travel firms Virgin Atlantic and Virgin Trains to developing renewable energy technologies - a possible pounds 1.6bn. BA, meanwhile, has joined forces with CO2-reductions trust Climate Care to enable travellers to offset the emissions created during flights.

Elsewhere, the European Commission is developing proposals for aviation to be included in the EU Emissions Trading Scheme, which will provide a direct incentive for airlines to make their operations more efficient. But this is unlikely to come into effect until 2008 at the earliest, with some observers suggesting that 2012 is a more likely target. In any case, it is expected to lead only to a small increase in air fares and therefore have a minimal impact on demand.

It is likely, therefore, that the UK government will have to proceed by other means. There is currently no tax on aircraft fuel, which other industries perceive as a subsidy, but taxing it directly is widely seen as problematic. If taxation were not introduced consistently across Europe, it would lead to 'tankering' - airlines buying fuel in bulk in the countries where it is cheapest.

The far more likely response is an increase in air passenger duty (APD). Organisations including the European Low Fares Airline Association have lobbied hard to prevent such measures, but John Stewart, chair of pressure group AirportWatch, thinks Gordon Brown will use the Stern Review as a reason to hike APD in the next Budget.

'People will be reluctant to give up the cheap weekend in Prague and Barcelona, as long as it remains cheap,' he says. 'The analogy I use is that if beer were 10p a pint, I'd drink more of it. Travel can become addictive because it is cheap. I don't think Ryanair and easyJet will go out of business, but I don't think they will be the cash cows they are now.'

Cause and effect

Callum Thomas, chair of sustainable aviation at Manchester Metropolitan University's Centre for Air Transport and the Environment, says the big question the government has to wrestle with is whether APD will be raised to limit demand or offset carbon emissions. …

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