Court Gives Airlines a Break | Business| Economy and finance news from a German perspective | DW | 06.04.2006
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Court Gives Airlines a Break

Gloom merchants have long predicted it's only a matter of time before the low-cost air travel bubble bursts, but it got a boost Wednesday when the European Court of Justice ruled that aviation fuel will remain tax-free.


Air travel is partially to blame for global warming

Like most people in Europe these days, it seems the European Court of Justice just can't say no to cheap flights.

In a case brought by German rail, Deutsche Bahn, the European Court of Justice has ruled that aviation fuel may remain tax-free.

The court decided that aviation fuel's tax-free status did not amount to illegal state aid, as Deutsche Bahn had alleged, but pointed to the fact that it is an accepted international norm. It also stressed that were Europe to deviate from the practice, its airlines would be at an international disadvantage.


In fact, Deutsche Bahn brought the case in December 2002 on the grounds it was at a competitive disadvantage.


Trains just can't keep up with planes

Its high-speed links represent immediate competition to air travel, according to DB, but are subject to considerably higher tax and therefore massively handicapped.

"We have had to cancel high-speed links between Cologne and Hamburg, for example, because we couldn't compete with rival flights," said a DB spokesman.

"The ruling at least illustrates that German legislators should show more consideration to the rail company by exempting it from eco-tax, for example," he said. DB currently pays 380 million euros a year in duties and taxes on energy, of which 180 million is eco-tax and 130 million fuel tax.

A blow for sustainable transport

"The competitive bias between transport companies has been cemented (by the judgement)," hit out rail lobby "Allianz pro Schiene" (Alliance for Rail), insisting the inequality between carriers was now set in stone in favor of the more environmentally damaging mode of transport.

"This is a blow for sustainable transport," said alliance CEO Dirk Flege.

Die Deutsche Bahn am Rhein

Train travel is less environmentally damaging than planes

Air travel is growing globally at about 5% a year, and is proving to be an environmental nightmare. Although passengers pay an airport passenger tax, the lack of tax on aviation fuel allows airlines to be wasteful, fanning ecologists' concerns that if air travel continues to grow unchecked, it will spell disaster for the planet.

The tax advantages amount to billions worth of subsidies a year, argue aviation industry critics.

"The ball is now in the government's court," said Flege. "Changing energy policy in favor of rail is up to government."

Transport MinisterWolfgang Tiefensee was unwilling to comment.

Airlines, meanwhile, welcomed the ruling.

"We consider the judgement a fair one, not least because Deutsche Bahn receives generous state subsidies," said a Lufthansa spokesperson in Frankfurt.

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