JETSTAR may set up a hub in Asia instead of Darwin if the Federal Government does not exempt domestic aviation from its emissions trading scheme.
Under the Government's green paper on emissions trading, domestic air travel will incur a carbon cost, but international airlines and Australian carriers flying overseas will be exempt so they can maintain competitiveness.
Jetstar's group general manager, commercial, Bruce Buchanan, told BusinessDay that the airline could be at a competitive disadvantage if it followed through with plans to base its Asian hub in Darwin.
"Our hub strategy funnels traffic through Jetstar's domestic network from ports such as Melbourne, Sydney, Brisbane and Adelaide up through Darwin and then into near Asian ports such as Ho Chi Minh City and Singapore," he said.
"The domestic legs of these Jetstar flights will attract a carbon charge while international carriers flying 'over the top of Darwin' and hubbing in Asian ports will not be subject to any carbon charge at all."
When plans for the Darwin hub were announced three weeks ago, Northern Territory Chief Minister Paul Henderson said it would inject $160 million into the local economy over five years, create 570 jobs and bring 250,000 more tourists.
Mr Buchanan said those domestic benefits could be reduced if the emission trading scheme encouraged Australians to fly overseas at the expense of the domestic tourism market.
Qantas chief risk officer Rob Kella agreed, saying the disconnect would result in "carbon leakage" and an increase in the price of domestic fares and holiday packages.
Virgin Blue chief executive Brett Godfrey said affordable air travel would be snatched away from many Australian families under the proposed scheme.
