Everyone Hates Europe’s Airlines Emissions Charges (UAL, DAL, LCC)

Beginning January 1st, all airline flights to Europe were required to pay a carbon emissions fee for the full distance of any flight to or from the continent. The fee is based on mileage and can be paid with carbon credits. The EU issues about 85% of the credits for free and requires the airlines to obtain the rest either by emitting less carbon or by paying for the privilege. Foreign governments are not amused. Talk of a trade war fills the air.

Governments object to having their companies paying a tax levied by another government for something that happens outside the foreign government’s jurisdiction. Airlines hate the bite it takes out of their profits. US carriers United Continental Holdings Inc. (NYSE: UAL), Delta Air Lines Inc. (NYSE: DAL), US Airways Group Inc. (NYSE: LCC), and American Airlines all have added the cost of the fees to their ticket charges. China has forbidden its air carriers to pay the fee without express permission from the government.

At the Singapore Air Show this week, the CEO of the International Air Transport Association (IATA) estimated that the new rules will cost airlines $1.2 billion this year alone, and their total expected profits are expected to reach just $3.5 billion.