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Economics Minister Mulls Auf Wiedersehen to Air Travel Tax

  • Why it matters

    Why it matters

    With elections looming, Germany’s economics minister has backed two potentially popular policies after Air Berlin’s bankruptcy announcement: Abolishing the air travel tax and boosting consumer protection for passengers.

  • Facts

    Facts

    • Over the weekend, talks began between Air Berlin and Lufthansa, with a view to a partial takeover of the bankrupt airline by its larger rival.
    • German and European competition law means Air Berlin is very unlikely to be sold off to a single bidder.
    • German’s air travel tax was introduced in early 2011 but has been opposed by industry groups and unions, which see it as handicapping German airlines and airports against foreign competition.
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Triebwerksproduktion in Dahlewitz
No special treatment, she says. Source: DPA

Germany’s economics minister has said the air transport tax must be quashed if the country’s airlines and airports are to compete against European and Gulf-based rivals.

Speaking in an exclusive interview with Handelsblatt, Ms. Zypries said she favored getting rid of Germany’s air transportation tax in the wake of Air Berlin’s bankruptcy, which has left the German airline industry in a vulnerable state. “Airlines and unions have long criticized the tax as disadvantaging German companies. Its abolition would strengthen German airlines’ competitiveness in Europe,” she said.

In 2011, Germany introduced a tax on all flights from German airports, set at around €7, or around $8, per ticket for short-hauls and rising to over €40 on long-hauls. Although many other countries have comparable charges, the German tax – intended to be environmentally friendly – is much higher with a heavier burden on customers.

Christine Behle, director for transport at trade union Verdi welcomed the proposal. “We have long called for the abolition of the air transport tax to achieve equal conditions for all airline companies in the German market,” she told Handelsblatt, adding that “competitive pressure has increased massively over recent years.”

The Free Democrats also backed ditching the tax, with the party’s economics expert Michael Theurer calling it a “double-charge” on an industry already included in Europe’s emissions trading scheme. But he criticized Ms. Zypries’ timing after Air Berlin’s collapse as an election stunt.

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Lufthansa is prepared for a partial takeover of all 17 of Air Berlin’s long-haul flights and some of its medium ones, including the company’s entire Austrian subsidiary Niki, which Ms. Zypries said would also help German interests. German competition law dictates that no single airline can acquire all Air Berlin’s assets, with the eventual outcome depending on complex talks between interested parties.

In a newspaper interview this weekend, CEO Thomas Winckelmann said more than 10 companies had approached the company since it declared bankruptcy earlier in the week. Niki is said to be especially sought after, with British rivals Easyjet and Thomas Cook and fellow German airline TUI fly apparently ready to vie for its attractive collection of non-stop routes within Germany, Austria and Switzerland.

As Lufthansa and Air Berlin felt out a tie-up in recent months, Ryanair chief executive Michael O’Leary had already spoken out vehemently against unfair competition in Germany. Last week he made claims that the German government was favoring Lufthansa in negotiations over its broke rival’s valuable landing slots.

Ms. Zypries denied charges of collusion, pointing out that earlier partnership talks between the two companies made the partial takeover a natural fit, especially with Lufthansa already operating some of Air Berlin’s aircrafts in a buy-to-lease program.

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Ms. Zypries said the German government extended a bridging loan to allow Air Berlin to negotiate a “quick and solid” deal, but above all for the sake of German holidaymakers.

“We couldn’t leave tens of thousands of travelers stranded around the world,” she explained, adding she supported Justice Minister Heiko Maas’ proposal for a mandatory Europe-wide insurance that would protecting ticket-holders in the event of airline insolvency.

Ms. Zypries, who coordinated government policy on the German air travel and aerospace industries for the last four years before taking over as economics minister in January, said that while German airlines have struggled to compete with Gulf-based airlines on long-haul business, further state help would not be the solution. “A subsidy race would not be the right answer and would hurt everyone in the long run,” she explained.

She said a combination of factors contributed to Air Berlin’s failure. The airline’s management had made a number of errors, including failing to properly integrate its acquisitions and a lack of clear image. “Was it a holiday airline or a business airline? European or long-haul? It wasn’t clear,” Ms. Zypries said.

 

Thomas Sigmund is Handelsblatt’s bureau chief in Berlin, where he directs political coverage. Dana Heide is a political correspondent for Handelsblatt in Berlin. To contact the authors: sigmund@handelsblatt.com, d.heide@vhb.de

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