Airlines Could Profit from New Europe Fees

Yesterday, we reported that a handful of major U.S. airlines had added a $6 round-trip fee to Europe flights in order to offset new carbon-emissions taxes put into effect by the European Union. Now, it turns out that the airlines may actually make quite a profit off of that extra six bucks.

According to a new study published in the Journal of Air Transport Management, the E.U.’s Emissions Trading Scheme may be a boon for airline profit margins. Researchers found that the European taxes would have only a minor impact on U.S. carriers, and that the airlines may, in fact, generate extra revenue by passing all possible costs of the new fees onto fliers.

As of January 1, the E.U.’s Emissions Trading Scheme requires airlines to purchase carbon-emission credits when flying to or from Europe. However, the airlines actually receive many of those permits for free. According to a summary of the study, “Windfall gains from free allowances may be substantial because, under current allocation rules, airlines would only have to purchase about a third of the required allowances.”

Reuters reports that the airlines get 85 percent their emissions credits for free, “opening up the possibility of windfall profits for airlines that pass on the cost of these allowances to passengers.” By enacting a flat fee that covers the potential—not actual—cost of the new E.U. taxes, the airlines are setting themselves up to make a killing.

Just how much will carriers rake in? Researchers estimated that the airlines could pocket as much as $2.6 billion over an eight-year period.  So far, Delta, American, United, Continental, and US Airways have already added a $3 each-way surcharge to flights departing from or arriving in Europe—and more carriers could follow suit.

If the study is right, then it’s possible that the airlines have come up with yet another cunning method to scare up cash from everyday fliers. But is this fair? Share your thoughts in the comments.

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