German court rejects challenge to air traffic tax

KARLSRUHE, Germany, Nov 5 (Reuters) - Germany's constitutional court has rejected an attempt by the federal state of Rhineland Palatinate to challenge the legality of the country's air traffic tax, which German airlines and airports say is hurting their business.

The court said on Wednesday that the tax, which has been in place since 2011 and applies to all passenger flights leaving German airports, is constitutional and does not contravene passengers' or companies' rights.

The tax brings the German government around 1 billion euros ($1.25 billion) a year, with Lufthansa, the country's largest airline, paying around 350 million euros in 2013.

The suit has been brought by the German state of Rhineland Palatinate, situated in west Germany, which argued airports in border regions were losing customers to rival airports in neighbouring countries such as the Netherlands, Belgium and Luxembourg, which do not levy similar charges.

Airlines have been lobbying fiercely to have the tax scrapped, and some lawmakers have indicated they are in favour of phasing out the payment.

However, the finance ministry, aiming for a balanced budget this year, has repeatedly rejected the idea of changes to the tax.

Irish low-cost airline Ryanair has also called for the charge to be dropped, urging Germany to follow the example of Ireland (Other OTC: IRLD - news) , which decided in April to discontinue its own air travel tax.

($1 = 0.7995 euro) (Reporting by Norbert Demuth; Additional reporting by Victoria Bryan; Editing by Maria Sheahan)