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Germany To Lower Plane Ticket Tax

by Ulrika Lomas,, Brussels

12 October 2011

Germany’s highly controversial plane ticket tax is to be lowered next year to compensate for additional costs arising from the extension of the European Union’s (EU) emissions trading scheme to flights over Europe from January 1, according to the German finance ministry.

From the beginning of 2012, passengers will be faced with additional costs on international flights as the European Union’s right to impose carbon levies on all commercial flights using European airports was recently deemed by the European Court of Justice to be “compatible” with international law.

In accordance with the European emissions trading scheme directive, airlines operating into and out of the EU will from 2012 be required to surrender varying emission allowances, depending on the flight, and will be required to purchase any additional permits outside of their free allowance.

As a result of the new provisions, experts have calculated that passengers on long-haul flights may be faced with additional costs of between EUR2 (USD2.70) and EUR12 a ticket.

Germany’s airline ticket tax, which entered into force from January 1, 2011, is currently levied at a rate of EUR8, EUR25, or EUR45 per passenger, depending on the destination.

A draft bill drawn up by the German finance ministry provides for a 5.52% reduction in the levy across the board, which would effectively lower the rates to EUR7.56, EUR23.62, or EUR42.52 respectively.

Concerned that they will be unable to sustain their cheap tariffs and that they will continue to lose passengers as a result, low-cost airlines have criticized the government’s proposed model, arguing that budget flights are disadvantaged under the current plans.

Despite an overall increase in recorded passenger numbers at airports in Germany in the first half of the year, low-cost and domestic flights have been significantly affected by the coalition government’s plane ticket tax.

In its release back in July, the German airport association ADV revealed that although the number of passengers at German airports rose by 8.1% in the first six months of 2011, despite turmoil in the Middle East and North Africa, high oil prices and the effects of the volcanic ash cloud, developments at individual airports in Germany varied considerably.

ADV emphasized at the time that the effects of the plane ticket tax are becoming increasingly visible. Indeed, airports with a high proportion of low-cost and domestic flights have shown a significant decline in passenger numbers, the association revealed.

Warning of potential job losses in Germany, chief executive of ADV Ralph Beisel explained that the levy has led to a dramatic decline in passenger numbers in some airports in Germany. Beisel emphasized that airports in bordering states, including the Netherlands, have greatly benefited from the tax, revelling in increased numbers of new passengers.

According to ADV, low-cost travel declined by 0.8% in the first half of 2011, while sustained declines were observed particularly in the case of low-cost domestic flights, which in some cases fell by 22.6%. In stark contrast, ADV analysis revealed that numbers significantly increased at bordering airports in the same time period (for example numbers rose by 29.7% at Eindhoven airport and by 71.8% at Maastricht airport, both located across the German border in the Netherlands). Germany’s plane ticket tax represents a clear location disadvantage compared to bordering foreign airports, the analysis showed.

German airlines fiercely opposed and criticized the government’s plans from the outset, warning of competitive disadvantages for the country's industry and arguing that passengers in border areas would merely fly from airports abroad.

The German government is due to re-examine its airline ticket tax and the effects of the levy next year, and is expected to present its findings to the German parliament or Bundestag at the end of June.

TAGS: environment | tax | air passenger duty (APD) | Netherlands | law | aviation | carbon tax | Germany | European Union (EU) | Europe

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