Carbon tax and Europe to dominate airline talks

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The world's airline bosses meet from Sunday in Beijing, with talks likely to be dominated by a bitterly opposed carbon tax, the European debt crisis and the perennial headache of high oil prices.

The International Air Transport Association (IATA) annual conference is likely to see airlines joining global calls for an alternative to the European Union's Emissions Trading Scheme, industry analyst Barry Grindrod said.

The European bloc has attempted to impose the controversial tax on all airlines, sparking a backlash from the United States, China, Russia and India as well as European carriers fearful of retaliatory sanctions.

Airlines flying to, from or within the European Union are required to monitor CO2 emissions for entire journeys and, if necessary, pay for exceeding their carbon allowances.

"This will be the mood of the IATA meeting, where I expect all carriers to support the global approach," said Grindrod, chief executive of Orient Aviation, a leading industry magazine.

The health of the European economy is also likely to come under scrutiny amid fears of the debt crisis currently gripping the continent, despite figures showing a 5.6 percent on year growth in European passenger traffic in April.

"The European sovereign debt crisis is unresolved and we are seeing signs that it is starting to affect Asia's export-driven economies," said Tony Tyler, director general of IATA.

The ongoing high price of oil, meanwhile, continues to erode carriers' profits, said Tyler, noting that fuel costs now represent roughly 34 percent of companies' expenses compared to only 14 percent when the last IATA general assembly took place in China in 2002.

The most recent forecast projected the cumulative net profit in the sector to have fallen this year to $3 billion (2.4 billion euros), or a margin of only 0.5 per cent.

Those forecasts, made in March, were based on a barrel of Brent Crude Oil at $115, but the price rose to an average of $118 over the past five months, said Tyler.

In 2010, the cumulative net profit of airlines reached $15.8 billion, before plunging to $7.9 billion in 2011.

IATA is expected to publish its next financial forecasts Monday, with the Chinese and Middle Eastern markets expected to play a crucial role if profits are to pick up.

"Last year, Chinese Airlines accounted for half of the industry's global net profit. Emirates, Etihad and Qatar Airways are growing fast and start to capture a large share of the world market," said Tyler.

The companies that are currently growing fastest are from the Middle East, with a passenger traffic rise of 16.1 percent year-on-year to April 2012.

Biofuels, an alternative to oil are also likely to come up. According to Tyler, biofuels 'could reduce the carbon footprint by 80 per cent'.

He cautioned, however, that their widespread adoption would require heavy government subsidies.