Airlines could see their profits slashed by more than half following a European Union court ruling that the EU's emissions scheme was legal.Analysts warned that carriers would struggle to recoup their losses through fare rises.Airlines can be charged for their carbon dioxide emissions on flights to and from Europe, according to an indicative verdict by Juliane Kokott, advocate-general of the European court of justice, in a blow to the industry and non-European governments, reported The Guardian.

China and the US have lobbied furiously against including air transport in the European Union's emissions trading scheme (ETS) from next year, arguing that it contravenes international law.Royal Bank of Scotland analysts said the impact is equivalent to 56 percent of operating profits across the nine airlines it covers, with Air France, Air Berlin and Scandinavian carrier SAS seeing the largest percentage impact over the next three years, given their low profit margins. International Airlines Group, owner of British Airways, could suffer a cut of nearly 14 percent."Environmental logic possibly, economic own-goal certainly," said Andrew Lobbenberg of RBS. He added that airlines would "struggle" to pass on the extra cost to passengers.

The International Air Transport Association also warned that the likes of BA and Air France will not be able to raise fares because Middle Eastern and US carriers, who compete with European airlines on a range of routes but are based outside the continent, will have to pay an ETS levy on a smaller number of their total services.

The ruling was greeted with jubilation by environmental campaigners, who want to ensure that emissions from aviation are subject to the same controls as those of other industries.

Sarah Burt, staff attorney at the campaigning organisation Earthjustice, said: "In the absence of an effective global measure for reining in greenhouse gases from aviation, the EU law is a necessary step to address this significant and rapidly expanding source of pollution."

Britain's climate change minister, Greg Barker, said: "We welcome today's legal opinion. The UK and EU will continue to robustly defend our policy to bring aviation into the EU's emissions trading system and believe it is consistent with international law. The aviation industry, in the same way as other industries, needs to play its part in reducing emissions."

If successful, Europe's move will be the first time emissions from flights, which make up about two to three percent of global greenhouse gases, have been regulated.Aviation and maritime transport were explicitly excluded from the 1997 Kyoto protocol, the only international binding treaty on emissions reduction.

Air industry bodies that helped to bring the case to court vowed to fight on. The Air Transport Association, representing US carriers, said: "We are disappointed that advocate general Kokott does not believe that the European Union is bound by the Chicago Convention, the treaty governing aviation, and that the unilateral application of the EU [emissions trading system] to international aviation otherwise does not violate law. Our view that the extension of this unilateral, regional scheme to aviation violates international law is supported by more than 20 countries, including Brazil, Russia, India, China, Japan, the United States and many others."

Under the plans, all flights to, from and within Europe will be subject to emissions trading, a system under which companies must have permits to cover the carbon dioxide they produce. A small number of permits are allocated to companies free while the rest must be paid for, and the proportion of free permits is reduced over time. At present, the permits are changing hands for about US$18.7 a tonne on the open market.