Showing posts with label EU-ETS. Show all posts
Showing posts with label EU-ETS. Show all posts

OPINION: Aviation at a Crossroads

The past couple of years have not been kind to the global aviation industry. Whether it’s the European union implementing a misguided carbon taxation scheme, the Indian government crushing its nascent airline industry under the weight of oppressive regulations and heavy fuel taxation, increased “NIMBY” (not-in-my-backyard : a term used to describe local residents who oppose aviation development near their residences)” activity in the west holding back growth in the airline sector, or a global airline industry plagued by rising fixed costs and softened demand in the face of the Global financial crisis, there is little doubt that the headwinds faced by the global airline industry are amongst the worst in its history.

Yet despite the apparent irrelevance of the airline industry to our daily lives, its potential decline has profound implications for my entire generation. To start with, it is important to define the essential role that aviation plays in local communities and in the economy as a whole. According to the Federal Aviation Administration (FAA), in 2011 civil aviation alone contributed to and supported more than $1.3 trillion in economic activity as well as 10 million jobs. These estimates ignore the thousands of jobs and billions of dollars in economic activity created and supported by military aviation; both directly in the air force, as well as in the thousands of companies involved in the supply chains of building and maintaining military aircraft for use both at home and with our allies abroad. In several communities, airlines, airports, and aircraft manufacturers are an important source of jobs- especially because positions in the former two sectors can’t realistically be outsourced.

On a more visceral level, the airline industry has contributed heavily to global and US economic growth. The most important aspect is that it makes sharing ideas, knowledge, and skills much easier. In the past, if you wanted to collaborate on a project with a group of engineers from Tokyo, it would take them days, even weeks to cross the Pacific by boat. But thanks to the miracle of modern aviation, you can now have them by your side in less than 24 hours, and at a reasonable fare to boot. This enhanced dissemination of knowledge and know-how has helped drive economic growth around the world, increasing the standard of life for everyone. On a more basic level, air cargo allows precious, time-sensitive, and/or valuable goods to be shipped around the world almost instantly – carving out new markets for exotic fruits and goods, as well as American exports. In today’s America, when unemployment amongst my peers is close to 15%, we can ill afford to lose the jobs provided by directly by aviation, let alone the many more indirectly made possible by air travel and air freight.

On a societal level, we all benefit when different cultures and viewpoints are brought together at common locations to discuss, integrate, and assimilate. Some of the best things about life in America (“Gangnam Style,” basketball, even apple pie) are foreign inventions brought here by immigrants. It is absolutely critical that we continue to make the world more interconnected, so that we can maximize the quality of life of all of the world’s citizens. It is no accident that as the aviation world has developed over the last few years; the degree of global integration has grown exponentially alongside. And in an increasingly uncertain environment which has led many economists to question whether the economy will even grow at all moving forward (or if we have settled into a “Great Stagnation”), cutting off a source and facilitator of economic activity makes little sense.

On a personal level, it kills me to see an industry that I love so much slowly be slowly squeezed to death (though there are bright spots like the United Arab Emirates and Singapore) by incompetent governance and an oblivious populace.

 And the threats to global aviation are numerous and diverse in nature. Part of the trouble is the incessant obsession with carbon dioxide emissions, and the general effect of environmentalism. According to the International Energy Agency (IEA), global aviation accounts for just under 3% of global greenhouse gas emissions (GHG). Yet the European Union proposed an invasive and expensive carbon tax, guaranteed to reduce airline activity and harm not only its own aviation industry, but those around the world. Environmentalists, because of their insistence on protecting each and every animal regardless of the cost, have effectively prevented the expansion of John F. Kennedy International Airport in New York, because the only viable option is to expand onto protected wetlands on Jamaica Bay. This lack of suitable airport expansion in the NYC area has in turn held back aviation development, as the number of flights at each New York City airport has been capped.

But because the runway capacity in the area is insufficient, there is now a huge backup of flights (planes lining up to land on runways) and an extraordinary amount of delays in the NYC airspace. The greatest irony of the situation is that now, tons upon tons of extra carbon dioxide emissions are being spewed into the air because the flights are forced to wait in line with their engines on at the airport or in the air. Many climate scientists would argue that this actually has a greater environmental cost than the loss of a few square miles worth of wetlands which could alleviate, if not solve outright, the problem. But the threats to aviation extend beyond inconsistent and incoherent environmental opposition. In recent years, the political power of so called NIMBYs has expanded. Around the world, especially in the great European cities like Frankfurt (where local residents passed a poorly thought out curfew for flights that decimated Frankfurt’s air cargo industry – likely creating more jobs for the superhubs in the Middle East) and London (where a combination of environmental, governmental, and local opposition to building a third runway at already slot restricted London Heathrow Airport threatens the place of London as a hub in the future aviation hegemony), but also in places like Philadelphia (where local residents are desperately trying to expand the constricted Philadelphia International Airport’s capacity). Admittedly, these residents are affected by airports in the region, but I have problems with using this as an argument to halt development.

The first is that in most, if not all cases, the local residents moved to the region after the airport was built there – they should have been aware of the risk that airports can expand and grow in importance. But more importantly, the needs of the few (local residents around airports opposing development typically number less than 1% of the population of the metro area that it serves) should not outweigh the needs of many. In times of crisis, like our economy today, it makes little sense to sacrifice new jobs and economic activity that would benefit the general region for such limited benefit.
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Editorial: European Union's Emissions Trading Scheme is Flawed

This week on Monday, I read an editorial in favor of the European Union's Emissions Trading Scheme (ETS) in the New York Times, and decided to respond with a op-ed.

In your editorial published on Monday, February 27th, your paper made the claim that Washington and other critics of the European Union's (EU’s) new Emissions Trading Scheme (ETS). Your editorial, while well intentioned, contained numerous misconceptions, and is, I believe, flawed at its core. Reduction of greenhouse gas emissions is an admirable goal, but doing it through this particular design is erroneous for both economic and sociopolitical reasons.

In the first case, air travel helps power the global economy, in multiple ways. If facilitates quick and easy transport of human capital and goods around the world, while simultaneously enhancing interpersonal relations and global awareness by transporting passengers to vacation and visit family around the world. The economic impact of the air transport is huge, accounting through direct, indirect, induced, and catalytic forces, for $2.5-$3.5 trillion annually, or 5-7.5% of global GDP. Our industry generates some 32 million jobs globally through the same confluence. Yet despite its position as a vital economic engine, the airline industry is a highly unprofitable venture; global commercial airlines lost a cumulative $5.5 billion between 2003 and 2011. And the European Union is no different. The region already has some of the highest aviation taxes in the world, with a myriad of passenger duties, entrance tariffs, and general taxes that have rendered its airline industry stagnant. The fallout from the EU’s misguided policies have already manifested themselves this year in the collapse of Spanair and Malev, and ETS will only serve to continue that trend.

In your piece, you claim that because the added cost increases would be of magnitude less than the $25 typically charged for checked baggage (though they will almost certainly be greater than the $2.60 claimed by the EU), they are not of consequence. While this relationship might hold true in most industries, the airlines are a special case. Airline flights are marginal at best; the profit margin on individual flights is often as low as 20 or 30 dollars in total. And because air travel demand, especially for long haul flights, is highly price elastic (meaning that a 1 % increase in price will decrease quantity demanded by greater than 1%). According to a compilation of estimates from various government sources and industry bodies, the price elasticity of air travel ranges from 1 to 1.1. Given that the price increases created by ETS range from 3-6% on most flights, the EU is facing a worst case scenario of losing up to 66 million passengers or $2 billion in revenue, or a best case scenario of losing 33 million passengers and a billion dollars of revenue. Can Europe’s tottering airlines afford such losses? The most likely answer, especially for marginal airlines, is no. Whenever taxes are increased, businesses at the margins suffer the most, and in the EU, that could mean the loss of dozens of valuable air service providers.

Secondly, and more importantly in most eyes, ETS represents a violation of the national sovereignty of other nations. Under the ETS, the EU will tax not only the portions of the flight that occur over its airspace, but all portions of a flight. This is akin to the US government taxing Chinese companies that sell in the US for their pollution in China; it is overstepping logical and legal boundaries. Moreover, the EU’s member nations (if not the EU itself because it is a trans-national body) are all signatories to various conventions of the air, none of which allow it to regulate the airspace outside of its borders as the ETS attempts to do. Thus Russia, China, India, and the United States are right to band together and denounce the European Union for this violation of their sovereign rights to the airspace in their country.

The worst part about ETS is that it hurts the EU’s own airlines the most. With emissions surcharges being levied on the whole portions of intercontinental flights, fast growing airlines such as Emirates and Turkish Airlines would have an advantage in transporting long haul European passengers because their flights would only face EU surcharges on less than half of the total distance of many itineraries. Europe’s economy is already tottering under the weight of its unbalanced debt structure. Is now really the time to be choking off a vital economic engine, especially with the threat of a double dip still looming?
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Lufthansa warns of ticket price increases as Europe implements Emissions Trading Scheme (ETS)

German carrier Deutsche Lufthansa is warning that flyers will face higher ticket prices as it refuses to shoulder the almost €130 million (approx US$ 170 million) additional costs it faces thanks to the European Union's new Emissions Trading System (ETS) which took effect on new year's day, January 1.

In a statement the airline explained its reasoning based on the requirements of the new ETS.
From the beginning of this year, all airlines are required to hold emission rights in the form of CO2 certificates for flights to and from Europe. In 2012, 82 per cent of the necessary certificates will be awarded to airlines free of charge. Airlines will have to purchase another 15 per cent of the certificates, with 3 per cent being reserved for new airlines.

As these allocations are based on average emissions for the years 2004 to 2006, the Lufthansa Group will have to buy at least 35 per cent of the certificates it needs to represent its growth in recent years. Judging by the average trend in certificate prices, Lufthansa expects to incur additional expenses of EUR €130m in 2012.

As competition is tough - especially from non-EU companies, whose operations are only subject to limited emissions trading rules - Lufthansa will have to pass on the costs via higher ticket prices, as recommended by the EU. Lufthansa will therefore include the cost of purchasing the certificates in its existing fuel surcharge as of the beginning of 2012. However, it has no immediate plans to increase this surcharge.

Carsten Spohr, Member of the Executive Board of Deutsche Lufthansa AG, said: “Climate change is a global challenge. This means we also need a global solution. The incorporation of airlines in the EU Emissions Trading Scheme means that European operators are now facing additional costs which will make flying within and via Europe more expensive for passengers. It will also distort competition and impact on the sustainability of the aviation industry if it proves impossible to implement with the competitive neutrality promised by policy makers. However, given the huge resistance at international level, it is unclear just how the situation will develop.”

Lufthansa last raised its fuel surcharge for European and long-haul flights on 15 December 2011 by three to ten euros. In the future, the surcharge will reflect both the price of oil and the cost of acquiring emission rights.
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Official highlights of 2011 by the Ministry of Civil Aviation

This is the official take of the Indian Ministry of Civil Aviation on highlights of 2011.

Bilateral Aviation Safety Agreement (BASA) signed with USA
India has signed Bilateral Aviation Safety Agreement (BASA) with United States on 18th July, 2011. This agreement provides for mutual certification of aeronautical products. It recognizes the mutual benefit of improved procedures for the reciprocal acceptance of airworthiness approvals and environmental testing, and the development of reciprocal recognition procedures for approval and monitoring of flight simulation training devices, aircraft maintenance facilities, maintenance personnel, flight crew members and flight operations. An Implementation Procedure for Airworthiness (IPA) was also signed in November, 2011.

India-US Aviation Summit
An India-US Aviation Summit was held in New Delhi from the 16th to the 18th of November 2011 in cooperation with the United States Trade and Development Agency (USTDA) and U.S. Federal Aviation Administration (FAA). The summit continued with the commitment of the United States and India to advance cooperation in the aviation sector. It focused on technical, policy and commercial elements in the sector, including infrastructure development, air traffic management, air traffic control, aviation security, general aviation and airspace utilization throughout India.

Amendments of Air Services Agreements (ASAs) with foreign countries
Keeping in view the recent developments in the Civil Aviation Sector and with a view to modernize and update the existing Air Services Agreements (ASAs) with foreign countries as per the ICAO templates, the Ministry of Civil Aviation has signed ASAs with Indonesia and Brazil and ASAs initialed with Jamaica, Dominican Republic, Mozambique, Uganda, Trinidad and Tobago.

European Union Emission Trading System (EU-ETS)

An international meeting of ICAO council and other Non-EU member states was held in New Delhi on 29th – 30th September to discuss the inclusion of aviation in the European Union Emission Trading System (EU-ETS). Discussions included legal objection to EUETs, Policy objections, the role of ICAO-the way forward and discussions on next steps.

27 countries including India participated: Argentine Republic, Brazil, Canada, China, Chile, Colombia, Cuba, Egypt, Japan, Republic of Korea, Malaysia, Mexico, Nigeria, Paraguay, Peru, Philippines, Qatar, Russian Federation, Saudi Arabia, Singapore, South Africa, Thailand, Turkey, United Arab Emirates and United States of America. It was attended by over 70 delegates.

A Joint Declaration was negotiated and adopted at New Delhi on 30th September, 2011 opposing the scheme.India thereafter took the lead to co-present a Working Paper (WP), in ICAO Council which included the Joint Declaration. This was adopted in the 194th Council Session of ICAO meeting held on 2nd November, 2011.

India-ICAN conference, 2011

The President of India, Smt. Pratibha Devisingh Patil inaugurated the 4th ICAO Civil Aviation Negotiations (ICAN) Conference held in Mumbai from 17-22 October, 2011. ICAN has been conceptualized by ICAO as ‘One-Stop-Shop’ for bilateral negotiation process.

A special Africa session was also held on the inaugural day which included participants from the African Union, ICAO, Ministry of External Affairs and the Ministry of Civil Aviation.

The Conference was attended by 64 states and 04 Regional Bodies. During the conference, more than 370 bilateral meetings were held between air services negotiators from states in all regions of the world which led to the signing of over 120 agreements and arrangements. India met with 37 countries and signed MoUs/agreed minutes with 22 countries.

Indira Gandhi Rashtriya Uran Akademi (IGRUA)
  • In the Flying Calendar Year Jan – Dec 2011, approximately 17000 hours have been completed and a total number of 80 CPL holders graduated in the current year.
  • DA 42 Aircraft and one DA 42 Simulator have been inducted for multi engine training.
  • 125 aspiring cadets have been selected to undergo training for the next year at IGRUA.
  • Considering the need for skilled manpower by the growing civil aviation industry in the country a proposal for upgradating (sic) IGRUA to a national Aviation University, is being considered.
  • A proposal for the Airports Authority of India to take over Fursatganj Airfield, with a view to extend the runaway and convert it into a Civil Airport, along with a Cargo Hub and Maintenance Repair Organization Center, is under consideration.
  • To supplement the demand for skilled technical manpower is proposed to start an Aircraft Maintenance Engineer training school at IGRUA.

Editor's Note: Why a commission for railways is under the civil aviation ministry is beyond our understanding.
Commission of Railway Safety performs its duty under rules framed under Indian Railways Act, 1989. In year 2011 (from Jan to Nov) CRS inquired into the 04 cases of collision, 07 cases of derailment, 06 cases of level crossing and 07 cases of unusual incidents. Besides that 473.959 KM new railway lines has been inspected by the CRS.

Air India Ltd.
  • Air India has extended the offer of discounted fares in full fare economy class to para-military forces. Earlier similiar discounts was provided to Armed forces personnel and their family members.
  • Air India has also decided to honour the children who are recipients of National Bravery Award 2010 by offering free tickets for their travel on domestic network along-with their parents/Guardians.
  • Air Chief Marshal Fali H. Major (retd.) was appointed as non-official part–time Director on the Board of Air India Charters Limited for a period of 3 years with effect from 10th May 2011.

Pawan Hans Helicopters Ltd.
The main objectives of PHHL are to provide helicopter support services to meet the requirement of oil sector, conduct operations in hilly and remote terrain, connecting inaccessible areas and providing charters for promotion of travel and tourism. Besides the above, the company has recently added the objectives of setting up of Heliports, helipads, Training Institute and Safety Institute. PHHL has emerged as one of Asia’s largest helicopter operators having a well-balanced own operational fleet of 42 helicopters at present.
  • The paid up share capital of the Company has been increased from Rs. 113.766 crores to Rs. 245.616 crores.
  • In 2010-11 the company achieved record revenue hours of 32175 as compared to 29890 in 2009-10.
  • Highest ever operating revenue of Rs. 423.96 in 2010-11 as compared to Rs. 384.04 crores in 2009-10 has been achieved.
  • As on 31.03.2011 the Company had operation & maintenance contract of 01 Dauphin N3 helicopter of Government of Gujarat, 2 Dhruv helicopters owned by ONGC and 4 Dhruv helicopters owned by BSF (MHA). Further, the company has signed in December 2010 another contract with HAL for operation & maintenance of 4 more Dhruv helicopters of BSF. The Company has provided one Dhruv helicopter taken on lease from HAL to Government of Maharashtra for Anti-Naxal activities at Gadcharoli, Maharashtra.
  • At present 16 Dauphin N & N3 helicopters are on contract with ONGC out of which 2 Dauphins are stationed overnight at the main platforms in addition to a dedicated Night Ambulance to meet any emergency evacuation.

Important Policy Decisions Taken during the year 2011
  • The Cabinet Committee on Economic Affairs (CCEA) in the meeting held on 29.03.2011 approved a proposal of AAI for a one-time grant-in-aid of Rs. 378.00 crore for final operational phase of a GPS Aided GEO Augmented Navigation (GAGAN) project over Indian Air Space subject to certain conditions.
  • A seminar on operation of Seaplanes in India was organized by Ministry of Civil Aviation, DGCA and PHHL on 22.04.2011.
  • A New Transfer Policy has been implemented by Bureau of Civil Aviation Security (BCAS). The new regional offices of BCAS will now be opened at Hyderabad, Ahmedabad, Guwahati and Amritsar and will be manned by the BCAS officers.
  • In order to streamline and facilitate the Public service delivery systems of Ministry of Civil Aviation and its organizations it has been decided to constitute a Task Force to consider modalities of introduction of a “Single Window Public Service Delivery System”
  • Ministry of Civil Aviation is the nodal Ministry for arranging to Haj Air Charter Flights to carry Haj pilgrims selected by Haj Committee of India. For the Haj Operation 2011, Ministry has selected two airlines viz. Saudi Arabia Airlines and NAS Air through competitive bid system from eligible airlines. A total of 875 flights were operated to carry 1,25,000 Haj pilgrims from 21 embarkation points in India. The whole Haj operation was completed on scheduled with almost 99% flights operated on day by schedule.
  • The Bay of Bengal Arabian Sea India Ocean Safety Monitoring Agency (BOBASMA) has been endorsed as a competent Air Space Safety Monitoring Agency by the Regional Air Space Safety Monitoring Advisory Group, ICAO. The Enroute Monitoring Agency is presently monitoring PBN compliance and assessing the level of safety in horizontal plane.
  • The Air Traffic Management (ATM) Contingency Plan for Indian Flight Information Regions (FIRs) have been updated to included revised route structure for safe and orderly flow of international traffic through upper Indian Air Space in case of disruption of Air Traffic Services.
  • Installation of Air Traffic Services (ATS) automation system has been completed at Mangalore
  • On the airports side the revised charges for handling Non Scheduled Operators (NSOs) at airports which were not within the ambit of Airports Economic Regulatory Authority, has been implemented with immediate effect.
  • With regard to major airports, the Airports Authority of India (Major Airports) Development Fee Rules, 2011 have been notified on 02.08.2011 in exercise of the powers conferred by clause (ii) of section 22A read with clause (ee) of sub-section (2) of section 41 of the Airports Authority of India Act, 1994 (55 of 1994)
  • With regard to perceived security threats from the surrounding areas of IGI Airport including the hospitality area (Aerocity), a Committee has been constituted by BCAS consisting of representatives from CISF, MCA, MHA, R&AW, ARC, Delhi Police and AAI under the Chairmanship of Jt. Commissioner of Security (CA).
  • Civil Aviation Requirement (CAR) dated 11th August 2011 regarding Flight and Duty Time Limitations and Rest Requirements of Flight crew engaged in scheduled/non-scheduled air transport operations and general aviation aeroplanes operations has been issued. The CAR is based on the report of the Committee formed by the Government to review the flight duty and time limitations of flight crew.
  • Minimum Safety Requirements for Helicopter Landing Areas used on Regular basis has been issued and which lays down the minimum safety requirements for helicopter operating to/from helicopter landing areas within the Indian Territory outside and licensed aerodrome/heliports and procedures to be followed by Helicopter operations for such operations.
  • Digital Automatic Terminal Information Service (DATIS) has been installed at Dehradun, Udaipur, Bhuntar airports, permitting automatic broadcast of Airport information to the Airlines/Pilots.
  • AAI has installed an Instrument Landing System at Agra, a defence airfield, commissioning flight check has been successfully completed.
  • ILS has been commissioned at Delhi for runway 09.
  • Guidelines in the form of air traffic management circular have been issued on mandatory rest of relief for Air Traffic Control Operators (ATCOs). This will help in reducing stress and fatigue of ATCOs and improving overall safety levels.
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