BA: Inclusion in emissions trading will mean price hikes

Passengers will have to bear the weight of fare increases if airlines join a global emissions trading scheme, British Airways (BA) boss Willie Walsh said in an interview with The Times.

Walsh said fares would have to rise to cover the cost of a global trading scheme, citing the sector's unsustainable financial state, with a total loss of $9bn (£5.5bn) forecast this year.

"This will add billions to the industry's cost base and airlines are unlikely to be able to absorb the cost. For the industry to play its part, the people who benefit from it will have to pay for it as well," said Walsh.

Airlines are in negotiations with the EU over how they are to be included in Phase 3 of the EU emissions trading scheme, which becomes operational from 2012.

Three versions proposed this week by the Aviation Global Deal Group, whose members include BA, Virgin and Air France-KLM, foresee a "carbon-neutral growth " target, a five per cent reduction target and a 20 per cent reduction in emissions through to 2020, all below a 2005 base.

The airlines are concerned that if they do not produce a credible proposal, they will have overly harsh regulations forced upon them.

Under the AGD proposal a proportion of the sector’s emission allowances would be auctioned to generate $5bn in revenue for climate change initiatives in developing countries.