Airline to pass on carbon tax impost

gov. au website which explains the carbon tax policy, “domestic aviation fuel excise will be increased by an amount equivalent to the carbon price on an annual basis over the fixed price period to provide an effective carbon price for aviation. ” That will see the excise on avtur increase by 6. 604 cents a litre to 10. 16 cents per litre in 2014-15, while the excise on avgas will rise by 5. 588 cents per litre to 9. 144 cents per litre in 2014-15. The current excise on aviation fuel is 3. 556 cents per litre.

Once the carbon tax regime switches over to an emissions trading scheme, planned for July 1 2015, the aviation fuel excise will then increase on a six monthly basis “based on the average carbon price over the previous six months. ” International aviation fuel use is not subject to the fuel excise, and is exempt from the scheme.

Australia’s major airlines have said they will pass on the costs of the new tax, estimating that domestic ticket prices will rise by around $3 a flight.

The Qantas Group has estimated a $110 to $115 million cost impact on its business in the 2012-13 financial year, while Virgin Australia has warned of a $45 million impact in FY13, based on current domestic fuel consumption.

Both airlines say the increase in aviation fuel excise under the carbon tax scheme will be passed on to passengers, saying they will be unable to absorb the cost increases.

“Based on the estimated additional costs, the Qantas Group expects that the price of a single domestic flight sector will increase on average by approximately $3. 50 in FY13. Fare increases will vary depending on sector length and will be communicated transparently to consumers,” Qantas said in a statement.

For its part, Virgin Australia said that, “Initial modelling indicates an average domestic fare increase per flight sector of approximately $3, which will vary depending on sector length”.

Meanwhile, the Regional Aviation Association of Australia (RAAA) has been vocal in its criticism of the carbon tax, saying fuel hikes of six cents per litre “will add millions of dollars to regional operators’ costs”.

“The Prime Minister claims that the carbon tax is aimed at the big polluters, but the regional aviation industry contributes around 0. 2 per cent of the nation’s total carbon emissions. The fact that the tax is being applied via the aviation fuel levy to regional aviation, an industry that barely emits carbon and which actually acts as an alternative to other carbon producing transport options, makes a mockery of the Prime Minister’s claim,” RAAA CEO Paul Tyrrell argued.

The RAAA also said that a lack of alternative fuel options would mean regional operators “cannot change their carbon emission behaviour”, unless they pull out of the industry all together.

Regional Express (Rex) is one regional carrier that has strongly criticised the carbon tax and other government decisions which impact regional aviation, saying that the removal of the en route rebate scheme for regional airlines, the additional fuel excise and “increased security at regional ports” are factors which would equate to a loss of at least $6 million per annum for the airline.

“Rex has already announced in its release of 1 June 2011 that the outcome of these measures could be the loss of air services to half a dozen marginal regional ports like Taree and Grafton,” Rex COO Chris Hine warned.

“I foresee many regional operators without the financial strength and diversification of the Rex Group being forced out of business once these take effect after 1 July 2012. Those surviving will have to cut back on marginal routes in order to remain in business. This will unfortunately mean that some regional communities will suffer the loss of their essential air services,” Hine added, calling on the federal government to “strongly reconsider its position on regional air services”.