EU-Airlines reaches Deal

[prashamk]

EU has reached a landmark deal with Airlines. Some extracts are here.

The European Union reached a landmark agreement Thursday to cap emissions from aircraft, raising the stakes in an increasingly ferocious battle with the United States over how to regulate global greenhouse gases.

In the first requirement of its kind, all airlines arriving or leaving from airports located in the EU would be obliged to buy some pollution credits beginning in 2012, joining other industrial polluters that trade in the European emissions market. That includes non-European carriers like American Airlines and Singapore Airlines.

Including airlines in that system is the boldest move yet by the EU to stamp its environmental policies on the rest of the world.

"At the end of the day it's the people who fly" who will pay more under the new system, warned Anthony Concil, a spokesman for the International Air Transport Association, the industry's biggest lobbying group.

For more click here

[prashamk]

Some updates:

At current oil prices, several large and small U.S. airlines will default on their obligations to creditors beginning at the end of 2008 and early 2009, according to a study issued today by AirlineForecasts, LLC and the Business Travel Coalition. The study shows that $130/barrel oil prices will increase yearly airline costs by $30 billion, while airlines will be able to generate only $4 billion in fare increases and incremental fees. The implication of this alarming trend is that several large and small airlines will ultimately end up in bankruptcy, and of those, some will be forced to liquidate.

"If oil prices stay anywhere near $130/barrel, all major legacy airlines will be in default on various debt covenants by the end of 2008 or early 2009," the study conducted by AirlineForecasts for BTC states. "U.S. commercial aviation is in full blown crisis and heading toward a catastrophe."

"Airlines are the primary source of inter-city transportation, critical to national and local economic development, the flow of human capital, movement of just-in-time parts for manufacturing, perishable food and other goods critical to our economy," the study says. "With airlines gravely threatened, so is our economic well-being."

The top 10 U.S. airlines will spend almost $25 billion in higher fuel costs this year over last year when jet fuel averaged $2.11 per gallon. Fuel hedge benefits could offset $5 to $6 billion of the increased fuel costs.

Earnings for the group, when one-time reorganization charges are removed, were less than $4 billion in 2007, the only year of profitability this decade. The group could lose as much as $9 billion over the next 12 months if the current range of oil prices holds.

Industry fares will have to increase at least 20% -- across the board and on average -- just to cover the dramatic gap-up in fuel costs from 2007. This is not possible given the level of uneconomic seat capacity in the system today.

[Bored Wombat]

Great News. Good for Europe.

Now if they could stop subsidising fossil fuel exploration and extraction we might be able to turn this baby around.