In the age of flying-shame, a flight tax might make sense from a consumer perspective. But the French government will find its national carrier Air France is a strong opponent to its implementation.
Air France condemned the French government’s plan for a new tax on flights, saying the levy would hurt the airline’s ability to invest in less polluting planes and aggravate already high costs of operating in the country.
“This new tax would significantly penalize Air France’s competitiveness,” the French arm of Air France-KLM said in a statement on Tuesday, estimating the extra costs would reach more than 60 million euros ($67 million) a year. “The company needs to strengthen its investment capacity to more rapidly reduce its environmental footprint, notably as part of its fleet renewal policy.”
The shares tumbled as much as 5.4%, the most in more than two months.
The dispute between Air France-KLM and the government — its most powerful shareholder — burst into the open just hours after Transport Minister Elisabeth Borne unveiled a plan to raise 180 million euros ($202 million) annually from taxes of as much as 18 euros a ticket on departures from France. The move is aimed at replenishing state coffers and funding commuter-transport systems like regional trains to fight climate change.
There is a “feeling of injustice among our citizens regarding the taxation of airline transport,” Borne said at a press conference in Paris. The levies will range from 1.5 euros on domestic and European economy-class tickets to 18 euros on international business-class flights. All airlines will have to contribute, she said.
The French government is seeking new ways to raise funds after dropping planned levies on gasoline and diesel in the face of the violent street protests that erupted across the country at the end of last year. Environment groups and some opposition lawmakers have also criticized the state for not taxing kerosene used to fuel aircraft.
The planned tax on airline tickets won’t apply to passengers in transit, or to flights to Corsica and French overseas territories, Borne said. France will continue to push for a tax on jet fuel at the European level, she added.
The French government plans to reduce a tax break on fuel used by truck transporters, a move that will raise 140 million euros annually, Borne said. The government will also gradually reduce a tax break on diesel used by construction companies.
The government decision “is all the more incomprehensible as this new air transport tax would reportedly finance competitive modes of transport including road transportation and not the energy transition in the air transport sector,” Air France said, adding that half of its operations depart from the country and its domestic network lost 180 million euros last year.
(Adds comment for Air France from first paragraph.)
–With assistance from Ania Nussbaum.
©2019 Bloomberg L.P.
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Photo credit: Air France passenger aircraft, operated by Air France-KLM Group, sit on the tarmac at Charles De Gaulle airport. Christophe Morin / Bloomberg