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IATA condemns German plans to impose air travel tax

Airline industry body IATA lashed out at German plans to impose an air travel tax while Europe’s aviation industry is struggling to make a profit amid a weak economic environment.

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Airline industry body IATA lashed out at German plans to impose an air travel tax while Europe’s aviation industry is struggling to make a profit amid a weak economic environment.

“The proposal should be axed. It is the wrong measure at the wrong time,” the International Air Transport Association (IATA) said on Tuesday.

German Chancellor Angela Merkel announced the tax plan on Monday, stunning aviation industry executives gathering for IATA’s annual meeting in Berlin and planemakers preparing for the opening of the Berlin Air Show on Tuesday.

“The most vulnerable part of the industry is in Europe. The last thing the industry here in Europe needs is additional taxes and measures that will slow down economic growth,” IATA Chief Economist Brian Pearce told reporters.

IATA on Monday raised its 2010 earnings estimate for the global airline industry and said the only region in which airlines would continue to post overall losses this year would be Europe.

The world’s airlines had their worst year ever in 2009, when demand dropped faster than capacity could be cut as companies and consumers shrank travel budgets to weather the global economic crisis.

The Americas and Asia-Pacific have started to recover, but Europe’s airlines have been dogged by airspace closures, labour strikes and a weakening of the euro.

“European airlines are facing a pretty difficult time with weak economies and governments seeking to generate revenues,” Pearce said.

German flagship carrier Lufthansa, which said the levy represented a “black day” for the airline industry, will likely take the biggest hit, analysts said.

Commerzbank analyst Frank Skodzik said the burden for Lufthansa would be about 200 million euros ($268.3 million) a year, assuming the carrier is able to pass on half of the tax to passengers.

Analysts and industry associations estimate the proposed tax could raise the price of air travel by an average 8-14 euros per ticket.

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