Airline passengers are facing higher costs because of European Union plans to include international aviation in its emissions trading scheme, says Air New Zealand.

The airline said it was disappointed by the decision of the EU's Court of Justice to uphold plans to include international aviation in the scheme from next year.

"Similar to the recently increased UK departure tax, higher costs due to the EU [emissions trading scheme] will need to be passed on to passengers and will be advised in due course," the airline said.

The British Government is increasing air passenger duty in April from £85 to £92 ($172 to $186) per passenger coming to New Zealand.

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Tourism Industry Association chief executive Tim Cossar had said the latest rise in departure tax meant a family of four would pay more than $736 in taxes just to leave the country and would price more potential visitors to New Zealand out of the market. United Continental Holdings, American Airlines and the Air Transport Association of America challenged the EU's attempt to extend the world's largest carbon cap-and-trade programme beyond its borders. The Luxembourg-based court's ruling, which can't be appealed, means the rules will be imposed on any flights to and from EU airports starting next year.

The United States House of Representatives passed a bill this year prohibiting the country's airlines from participating in the EU programme after the industry estimated the cap-and-trade system would cost US airlines US$3.1 billion ($4 billion) from 2012 to 2020.

That measure needs backing from the Senate and President Barack Obama to become law.

Fitch Ratings said it expected the ruling by the European Court of Justice to pave the way for a broadening international trade dispute over access to the EU aviation market.

"We believe threats of trade retaliation over the EU's cap-and-trade system will pose growing threats to aviation market access in both developed and emerging markets next year," Fitch said. "Retaliation may be largely rhetorical in the early stages, but an absence of progress next year may trigger protectionist responses especially from emerging-market governments."

The International Air Transport Association (Iata) said the success of Europe's plans would depend on how non-European states viewed its legal and political acceptability. "In this respect, there is growing global opposition," Iata said. India was reported to have instructed its airlines not to comply and legal challenges were expected, Iata said.

"[Today's decision] does not bring us any closer to a much-needed global approach to economic measures to account for aviation's international emissions."

- Additional reporting Bloomberg

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