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07/16/2010

When German Chancellor Angela Merkel's government passed its €80 billion austerity package in early June, critics were quick to blast it for lack of details. Indeed, even now it remains unclear where significant chunks of the planned savings, scheduled to take place from 2011 to 2014, are to come from.

But the plan did include some details. And on Thursday, reports emerged that the government is moving to implement one of them: the air traffic tax. A draft law produced by Germany's Finance Ministry, under the leadership of Merkel's party ally Wolfgang Schäuble, calls for a €13 tax on all flights within the EU as well as to Northern Africa and Russia, beginning on Jan. 1, 2011. For longer distance flights, Berlin wants to implement a €26 tax.

Merkel's government is hoping the tax will bring in an additional €1 billion each year, with the money going toward balancing the budget. It will be levied on all passengers who start their trip from an airport in Germany.

Critique of the plan, however, has been quick and sharp -- and some of it has come from within Merkel's own governing coalition.

Another Rift

The draft law includes taxes on passengers, but leaves freight traffic untouched. Private jets, too, are not subject to a new tax. Speaking to the tabloid Bild on Friday, Patrick Döring, parliamentary floor leader of Merkel's junior coalition partners, the Free Democrats (FDP), said that it is wrong to tax vacation travellers while leaving rich fliers in private jets untouched. "Business too has to make a contribution. First Class passengers should have to pay more," he said.

Döring's comments represent yet another rift in a Merkel-led coalition which has distinguished itself more for fighting than governing since it was elected last October. In recent weeks, Merkel has managed to turn down the volume on the bickering, but Döring's FDP still has several points of disagreement with Merkel's CDU, and hasn't been shy about giving voice to them.

The opposition Green Party, meanwhile, blasted the tax for not being designed in a way that would contribute to CO2 emissions reductions. The party says that a blanket tax should be replaced by higher taxes on shorter domestic flights, where there is an alternative to flying.

Leaving Lufthansa in the Lurch

Most vehement, however, were the protests coming from German airlines and others that fly into to Germany. Many have complained that the tax represents a competitive disadvantage for airlines that have hubs in Germany. "It is unacceptable," said a spokesman for Air Berlin, Germany's second largest airline behind national carrier Lufthansa.

Lufthansa, for its part, criticized the law for focusing entirely on passengers while leaving freight flights untaxed. The company said that it endangers German jobs. In addition, an airline spokesman said "the fact that longer flights are taxed at double the rate of shorter flights is absolutely incomprehensible." He worries that passengers leaving on long-distance flights could easily book through other European airports, thus leaving Lufthansa in the lurch.

Airports situated close to Germany's borders with neighboring countries are also concerned about a loss of business. Indeed, the Irish budget airline Ryanair has already threatened to cease flights to the Frankfurt-Hahn airport, located close to Germany's borders with France, Luxembourg and Belgium.