UPDATE 2-German air travel tax overshadows IATA meeting

* Airlines body IATA lashes out at German govt tax plans

* Berlin targets up to 1 bln eur from air travel tax

* Lufthansa CEO: won’t be able to pass on tax to customers

* Airports association says tax to hit traffic, cost jobs

* Lufthansa shares fall 2.2 pct, Air Berlin down 2.2 pct

(Adds Lufthansa CEO comment, airports association comment)

BERLIN, June 8 (BestGrowthStock) – Airlines lambasted German plans
for an air travel tax on Tuesday as Europe’s aviation industry
struggles to make money in a weak economic environment.

Berlin’s plans and warnings of weak European growth this
year overshadowed the closing day of airlines body IATA’s annual
meeting on Tuesday, where top bosses spent three days meeting
engine suppliers, planemakers and back-office cost-cutters.

Germany, Europe’s biggest economy, intends to impose a tax
of up to 1 billion euros ($1.3 billion) a year as part of a
package of budget cuts and taxes to shore up stretched public
finances.

“This is simply a cash grab by a cash-grab government,
painted green with no environmental benefit,” IATA Chief
Executive Giovanni Bisignani told reporters in a briefing.

German Chancellor Angela Merkel on Monday stunned aviation
industry executives gathered at the IATA meeting and planemakers
preparing for the opening of the Berlin Air Show as she
announced the air travel tax plans, part of 80 billion euros
($107 billion) of budget measures. [ID:nLDE6561E9]

The German move comes as governments across Europe vow to
become more frugal and rein in their budget deficits to bolster
their economies against the region’s debt crisis.
[ID:nLDE6570P8]

It added to concern over IATA’s warning that Europe’s
aviation industry was recovering more slowly than expected, hit
by a volcanic ash cloud that closed airspace across a large part
of the continent in April, as well as by a weaker euro.

“The most vulnerable part of the industry is in Europe. The
last thing the industry here in Europe needs is additional taxes
and measures that will slow down economic growth,” IATA Chief
Economist Brian Pearce said.

BLACK DAY

The air travel tax is seen raising prices by 8-16 euros per
ticket. Other European Union members that have introduced such a
tax include Ireland, Britain and the Netherlands.

“That doesn’t sound like a lot, but it’s more than the
collective earnings of all airlines in Germany,” said Wolfgang
Mayrhuber, chief executive of German flagship carrier Lufthansa
(LHAG.DE: ), which faces the biggest burden from the proposed tax.

The airline, which said the levy represented a “black day”
for the industry, will take an annual hit of about 200 million
euros a year, Commerzbank analyst Frank Skodzik said, assuming
the carrier can pass on half of the tax to passengers.

Mayrhuber said there was “no way” Lufthansa could pass on
the tax to customers.

German airports body ADV warned that air traffic in Germany
could drop by as much as 3 percent as passengers seek cheaper
tickets in neighbouring countries and airlines shift their
traffic elsewhere to avoid the tax.

Lufthansa shares closed down 2.2 percent at 10.515 euros,
while the Stoxx Europe 600 Travel & Leisure index (.SXTP: ) eased
1.9 percent. Shares of Air Berlin (AB1.DE: ), Germany’s
second-biggest airline, fell 2.2 percent to 3.425 euros.

The world’s airlines had their worst year ever in 2009,
losing a total $9.4 billion, when demand dropped faster than
capacity could be cut as companies and consumers shrank travel
budgets to weather the global economic crisis.

While IATA on Monday raised its 2010 earnings estimate for
the global airline industry, it cut the outlook for Europe —
the only region where it nows airlines continuing to post
overall losses this year. [ID:nLDE6560L6]

And the tax news came as Dubai airline Emirates [EMIRA.UL]
placed a record $11 billion order for 32 Airbus A380s
[ID:nLDE6570JJ] in an announcement at the Berlin airshow on
Tuesday.

Stock Analysis

($1=.7453 euros)
(Reporting by Maria Sheahan; Editing by Mike Nesbit and Andrew
Callus)

UPDATE 2-German air travel tax overshadows IATA meeting