EU

Euro carbon taxes are coming: How airlines can stay airborne

December 15, 2011: 12:14 PM ET

The U.S. government is fighting to keep American companies from having to comply with new EU carbon taxes, but airlines must prepare for the worst-case scenario. Here are a few options.

FORTUNE -- The skies are not looking too friendly these days, at least for an airline. Already crunched by high fuel prices and struggling customers, airlines will face tougher rules on carbon emissions for flights landing and taking off in Europe as of January 1, if the European Union has its way.

The U.S. government is fighting to keep American companies from having to comply, but airlines must prepare for the worst-case scenario.

The situation is already bleak. Oil prices have been increasingly volatile in recent years, and airlines are particularly exposed to these fluctuations. Add to that, consumers have started flying less often since the global recession started in late 2008.

To stay above ground, almost every company has piled on extra fees where they can -- surplus legroom, baggage check, in-flight food -- irking passengers who had already cut back on flying. Some companies, such as United Airlines (UAL) and Continental, have combined in an attempt to seek safety with sheer size. On the other end, American Airlines (AMR) declared bankruptcy in November.

And now, the European Union is cracking down on carbon. Next year, airlines will have to pay the EU for the carbon they emit -- past a certain threshold -- during every flight that graces a European runway. No airline is pleased. More

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