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Airlines count the cost of carbon

Australia’s major airlines say domestic travellers will bear the full brunt of the federal government’s carbon plan.


Qantas and Virgin Australia say they cannot absorb the higher cost of fuel when the scheme kicks in July 2012.

The Flying Kangaroo said on Monday the average domestic fare would go up by $3.50 per flight – or $7 a return ticket. Virgin said it expected the increase to be about $3 per ticket, depending on the length of the flight.

In terms of the bottom line, Qantas said it expected the carbon plan to cost the airline group – comprising full service Qantas mainline and low-cost offshoot Jetstar – between $110 million and $115 million in 2012/13.

“In the context of the significant challenges facing the global aviation industry, the Qantas Group will be unable to absorb the additional costs associated with the carbon price,” the airline said in a statement.

“There will be a full pass-through to customers.” Qantas was the second worst performer among the S&P/ASX50, sliding 3.25 per cent, or 6.5 cents, to $1.935 and giving back gains from last week in response to the grounding of Tiger Airways.

Virgin stock tumbled 2.86 per cent, or one cent, to 34 cents after the carrier said the carbon plan would result in a $45 million hit in 2012/13, based on current domestic fuel consumption.

The airline said it was too early to forecast the impact of the carbon plan on passenger demand.

The federal government has proposed charging Australia’s 500 biggest companies $23 per tonne of carbon emitted, from July next year.

While some industries would receive financial assistance in light of the new scheme, Qantas said domestic airlines “will not have access to transitional assistance or compensation arrangements”. International aviation fuel was not included in the carbon price scheme.

Meanwhile, Regional Express (Rex) said the proposed price on carbon, on top of an “avalanche” of adverse government measures, would “decimate” air services to the bush.

Rex chief operating officer Chris Hine said pricing carbon, removing some rebates for regional airlines, an increased fuel excise and additional security measures would cost the airline about $6 million per year.

“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,” Mr Hine said in a statement.

“Given the extremely fragile state of regional aviation in Australia today, once an operator goes out of business it could become irreversible as the returns are too slim and uncertain to attract new entrants.” Rex was untraded at 85 cents.


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