U.S. Airlines Could Gain From New EU Emission Charges

The study published in the latest edition of the Journal of Air Transport Management warns that U.S. airlines may be looking to gain by increasing fares by more than what is required to offset new emissions costs established by the European Union. The study found that U.S. airlines would profit by as much as $2.6 million over the next decade on European flights by overcompensating for the emissions expense. Delta (NYSE:DAL), United-Continental (NYSE:UAL), American and US Airways (NYSE:LCC) have already added a surcharge on European tickets.

Although the airlines are mum on the reason for imposing the new surcharge, USA Today cites Rick Seaney, chief executive of FareCompare.com, who said it “is pretty clearly related” to the carbon offset. The EU set new emissions charges in place starting January 1 in order to reduce greenhouse effects of traffic through their air space. The new law requires airlines to buy allowances if they exceed the emissions caps. FareCompare.com says that other major international airlines such as Air France, British Airways, Air Canada, Lufthansa and KLM have also added the $6 surcharge. One Malaysian airline has said it will stop service to Europe because of the charge.

USA Today quoted Steve Lott, a spokesman for Airlines for America, the trade group representing major U.S. airlines, who defended the airlines by saying, “It defies logic and the experience of the airline industry to suggest that a tax that imposes costs on the airlines would in practice serve as a revenue-raiser for the industry.”  The report is drawing some controversy from industry experts who claim that the cost to the airlines will be more than the study assumes and also that the EU will be monitoring the airlines closely so that no profit would be possible.

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Here’s how the following Airline stocks are reacting to the news today:

Delta Air Lines Inc. (NYSE:DAL): DAL shares recently traded at $8.68, down $0.17, or 1.92%. They have traded in a 52-week range of $6.41 to $12.55. Volume today was 1,468,633 shares versus a 3-month average volume of 11,077,700 shares. The company’s trailing P/E is 16.38, while trailing earnings are $0.53 per share.

United Continental Holdings (NYSE:UAL): UAL shares recently traded at $18.32, down $0.11, or 0.6%. They have traded in a 52-week range of $15.92 to $27.72. Volume today was 868,820 shares versus a 3-month average volume of 5,769,180 shares. The company’s trailing P/E is 10.52, while trailing earnings are $1.74 per share.

US Airways Group, Inc. (NYSE:LCC): LCC shares recently traded at $5.91, down $0.06, or 1.01%. They have traded in a 52-week range of $4.53 to $11.28. Volume today was 850,184 shares versus a 3-month average volume of 6,729,310 shares. The company’s trailing P/E is 11.76, while trailing earnings are $0.50 per share.

JetBlue Airways Corporation (NASDAQ:JBLU): JBLU shares recently traded at $5.22, down $0.27, or 4.92%. They have traded in a 52-week range of $3.49 to $6.78. Volume today was 1,902,978 shares versus a 3-month average volume of 5,938,000 shares. The company’s trailing P/E is 21.84, while trailing earnings are $0.24 per share.

To contact the reporter on this story: Ashley Cloninger at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com