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Germany Tax: Carriers Criticize German Air Fare Tax

BERLIN — Germany's plan to introduce an environmental tax of 1 billion euros a year on air travel tickets met with fierce resistance on Tuesday from airlines, which accused Berlin of making a shortsighted "cash grab" at the expense of an industry still struggling to return to profitability.

"This tax is a body blow to the weak economy and a fragile industry," said Giovanni Bisignani, chief executive of the International Air Transport Association, a lobbying group based in Geneva. "It is a kick in the teeth to travelers at a time when they can least afford it."

European carriers are largely expected to miss out on the strong global recovery in air traffic this year because of still-sluggish economic growth in Europe and the effects of the volcanic ash cloud that led to the closure of most of the region's airspace for six days in April. The I.A.T.A. said on Monday that it expected airlines in the region to have a collective loss of $2.8 billion this year, while airlines globally were forecast to record a profit of $2.5 billion.

The German chancellor, Angela Merkel, on Monday introduced a major austerity package aimed at achieving more than 80 billion euros ($96 billion) in savings by 2014. Alongside deep cuts in spending on defense and social programs, the package also included plans to levy a departure tax on airline tickets, which was expected to vary according to noise levels and fuel consumption.

But airline executives expressed deep skepticism about the initiative's green intentions, pointing to similar taxes adopted in Britain and Ireland, which, the executives said, had yielded little in terms of concrete steps to reduce carbon emissions.

Another such tax imposed by the Netherlands in 2008, intended to raise 300 million euros a year, was abandoned a year later after it was blamed for causing a sharp drop in passenger traffic at Schiphol airport of Amsterdam, a major European hub. A government study estimated that the tax had cost the Dutch economy about 1.3 billion euros in revenue.

"If this is really related to the environment, I would like the chancellor to tell us how many trees she will be planting with this 1 billion euros," Mr. Bisignani said of the German proposal.

Wolfgang Mayrhuber, the chairman and chief executive of Lufthansa, the largest German carrier, noted that the sum that Germany intended to raise from the tax was more than the collective earnings of all German airlines last year.

"I think that if you took away all of the earnings from Germany's carmakers, you would probably hear a lot of horns honking," Mr. Mayrhuber said.

Michael Engel, managing director of the German Airline Association, estimated that the tax would raise the cost of air travel by about 10 to 15 euros a ticket.

Environmental groups argue that raising the cost of flying through taxes on tickets or fuel creates an incentive for passengers to fly less often or to opt for greener transport alternatives like high-speed rail, where they exist.

"The awareness raised by the green movement has made it possible for treasuries to see this as one way to raise revenues," said Peter Morris, chief economist at Ascend, an aviation consulting firm in London. He added that the burdens of bailouts for the banking and automobile sectors, as well as the latest aid package for Greece, could tempt more European governments to follow suit.

The lower fares that have resulted from competition from low-cost airlines over the last decade have also made the industry an easier target for taxation, Mr. Morris said.

"Having reduced the cost of travel, they've increased the demand, and that's now drawn the governments' attention to this as a growth industry," he said.

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