* China won’t cooperate with EU on ETS – CATA

* Will consider legal action vs EU, but no rush on this

* ETS could cost Chinese carriers $123 mln in first year

* Cathay may raise prices, SIA (SES: E2:C6L.SI – news) to be more fuel-efficient

(Adds China industry group comments, details, links)

HONG KONG/SINGAPORE, Jan 4 (Reuters) – China’s
airlines will refuse to pay any charges under the European
Union’s new carbon trading scheme, while other Asia Pacific (Chicago Options: ^RASPUSD – news)
carriers, already battling a weak travel market, are likely to
pass on the extra cost to passengers.

The EU’s Emissions Trading Scheme (ETS) was launched in 2005
as one of the major pillars of the bloc’s efforts to combat
climate change. From Jan. 1, all airlines using EU airports are
included in the cap-and-trade scheme.

“China will not cooperate with the European Union on the
ETS, so Chinese airlines will not impose surcharges on customers
relating to the emissions tax,” Cai Haibo, deputy
secretary-general of the China Air Transport Association (CATA),
told Reuters by telephone on Wednesday.

CATA represents the country’s four major airlines:
flag-carrier Air China Ltd , China Southern
Airlines , China Eastern Airlines
and Hainan Airlines.

Chinese airlines would consider taking legal action against
the EU over the move to charge for carbon emissions on flights
to and from Europe (Chicago Options: ^REURUSD – news) , Cai said, adding they would take their time
on this, mindful that U.S. airlines recently lost a legal
challenge against the ETS, and given that collection of the tax
from airlines will not be until March 2013.

Australia’s Qantas Airways (Hamburg: 390413.HM – news) has said it also plans
to take legal action against the scheme.

“We are now walking on two legs — first, we would not rule
out the chance of taking legal action and, second, to resort to
the government for retaliatory measures. Several departments
have been looking into this,” Cai said.

CATA estimates the scheme will cost Chinese airlines 800
million yuan ($123 million) in the first year and more than
triple that by 2020.

HIGHER PRICES

Germany’s Lufthansa (Xetra: 823212 – news) , the world’s second-largest
long-haul carrier after Dubai’s Emirates, warned passengers on
Monday to brace for higher ticket prices as it refuses to
shoulder the costs of the carbon trading scheme.

The EU says its ETS, which already applies to other
industries, is the fairest way to cope with aviation’s
contribution to global warming and cuts through years of
inconclusive efforts to come up with a worldwide alternative.

Hong Kong-based Cathay Pacific Airways Ltd and
some other Asian airlines, facing a sluggish economy and weak
cargo demand, said they may impose surcharges or increase
airfares to counter the ETS impact.

Delta Air Lines (NYSE: DAL – news) , the No. 2 U.S. carrier, slapped a
$3 surcharge each way on tickets for flights between the United
States and Europe.

“It’s inevitable that increased costs will be passed on to
passengers. We will share the details at the appropriate time,”
said Carolyn Leung, a spokeswoman for Cathay Pacific, whose CEO
has said the ETS would add about HK$50 ($6.44) to a ticket
between Hong Kong and Europe.

Singapore Airlines Ltd (SIA), the world’s
second-most valuable airline, said it would try to offset the
impact of the ETS by improving fuel efficiency and reducing its
carbon emissions, which would lower the carbon charges.

“However, we’re not yet ruling out any options for
recovering the additional cost,” SIA spokesman Nicholas Ionides
said in an emailed response to a query for this article.

Tony Tyler, director general of the International Air
Transport Association (IATA), has said the ETS would cost
airlines 1.2 billion euros ($1.6 billion) this year, and he
warned that airlines could struggle to pass this on to
passengers in a weak travel market.

IATA, whose 230 members carry more than 93 percent of
scheduled international air traffic, forecast a 29 percent drop
in the industry’s profit this year to $4.9 billion, dented by
the weak global economy and high fuel prices.
($1 = 7.7681 Hong Kong dollars)
($1 = 0.7661 euros)

(Reporting by Harry Suhartono in SINGAPORE, Alison Leung in
HONG KONG, Narayanan Somasundaram in SYDNEY and Edmund Klamann
in TOKYO; Editing by Matt Driskill and Ian Geoghegan)

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