COMMENT: Tourism and air travel - does the Prime Minister understand?

Last week the Prime Minister delivered a fine speech in central London to a travel industry audience on the challenges and opportunities that tourism presents.  He brought along his Tourism Minister, John Penrose, but not his largely invisible (to the airline industry) Secretary of State for Transport Philip Hammond.

Sadly he missed the major point.  And even more sadly the opportunity to question him was not offered. 

It is useless pontificating about the need to make the incoming tourist industry work if at the very point of entry the visitor is going to be ripped off.  OK technically APD (that is what we are talking about – Air Passenger Duty) is a departure tax, paid for when booking the journey, but for practical purpose it is just another cost added to the trip. 

We are all aware that the UK is an expensive place to visit when actually landed on these Isles, but there can be little doubt that when our potential visitor looks at his budget and compares with the cost of visiting somewhere else, APD must be the final blow.  The Dutch quickly dropped a similar plan when they realised the consequences for Amsterdam Airport.  Unfair taxes drive international passengers to other gateways and hubs.

According to the Office of National Statistics over twice as many visitors arrive by air (and are taxed) than by tunnel/sea (and are not). 

Mr Cameron is taking his family holiday in Cornwall, and his track record shows that he finds the British Isles ideal for the holiday break, no fancy Italian or Caribbean island for the Prime Minister.  Well done.  Most of his friends in Parliament would have decamped abroad, with the cost (one assumes) coming out of their pocket.  For a family of four in Economy the tax to, say, Florida this year is £180 (the same for Economy Plus but £360 in Business Class).  Next summer it will be £240 (£480).  The tax is calculated by the distance to the capital of the country from London and therefore Hawaii is the same as Washington DC. 

Many British have family in Australia and other far flung parts of the former Empire.  Boarding the aircraft will cost a family of four a minimum £340 without the carrier receiving a penny.  Likewise for people coming in the other direction.  If you are Australian you will still have to pay our departure tax.

In his speech Mr Cameron pointed out that the UK has fallen from sixth to 11th place in the World Economic Forum’s Travel and Tourism Competitiveness Ratings between 2008 and 2009.  He pointed out that China sends more tourists to Germany than to the United Kingdom and of the billions generated by tourism.

He spoke strongly of the virtues of these islands.  “I want us to have the strongest possible tourism strategy,” he said and spoke of four parts to his approach.  What the government does; local government and its role; the private sector; and finally what he called “others” including (hurray!) a mention of the horrendous immigration hold ups at Heathrow (which he called Customs – his speech writers ought to visit Heathrow).

Perhaps he needs to book a holiday abroad for Christmas, or invite his relations over at his expense.  Suddenly the real truth of why the UK is losing its competitiveness will be brought home.

We have news for Mr Cameron.  The previous government’s panic measure to increase the Treasury revenue will take us down towards the Blue Square League in terms of competitiveness.  (The Prime Minister was full of sporting connections in his speech.)  Ireland is already feeling the pinch and in Germany a much lesser tax burden has caused an almighty outburst by Lufthansa’s outgoing CEO.

The AERBT observation is simple.  If an acceptable resolution cannot be achieved between the Chancellor and the industry by November the tax rises due at that time should be put on hold.  We are fully aware that we are living in tough times, but it works both ways.  The extra revenue will not compensate for the country's overall loss.

If Britain is to retain its leadership in world air transport it is vital that we get the next step right in terms of taxation.  From 2012 aviation will enter the EU Emissions Trading Scheme, another financial complication with serious consequences for airlines that fail to comply. 

In closing Mr Cameron said:  “We’re going to bring a whole new approach – and a new attitude – to tourism.  Because we think tourism is one of the missing pieces in the UK’s economic strategy.  Our commitment to tourism is not new-found!”

Actions speak louder than words Mr Prime Minister.  Cancel Air Passenger Duty. 

Malcolm Ginsberg
Editor in Chief

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British Airways and its ground staff

GROUND STAFF at British Airways are likely to vote yes to an agreement with the GMB Union who are recommending the acceptance of a pay deal agreed “in principal” last week.  This agreement, if accepted by members, will conclude negotiations on this issue which began in January 2009.  Overall employment levels will fall by 500 (some 200 have already left), all by voluntary means and with reasonably enhanced severance arrangements and with provisions for redeployment.  The deal also included a one year pay freeze to October 2010. www.ba.com www.gmb.org.uk 

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Heathrow sets record numbers

BAA LTD has reported a slight increase of 0.3% to 10.9m passengers for its six UK airports in the month of July.  Heathrow recorded its busiest ever month, with 6.7m people transiting the airport – 3.5% more than last year.  Sunday 18 July set a new record with 232,000 passengers.  Across BAA, the fastest growing market in July was Europe, with an increase of 2.9% combining both charter and scheduled flights.  Long haul traffic was up by 0.5% but domestic traffic was 4.6% lower than last year.  The main source of passenger growth at Heathrow was the European market, where additional capacity fuelled an increase of 9.5%.  At Stansted, a near 8% drop in seats offered produced a similar drop of 7.2% in passengers.  At the three Scottish airports Aberdeen's traffic fell by 4.1%, Edinburgh grew by 0.6% and Glasgow recorded a drop of 3.6%.  Southampton's July numbers were down 1.4%, while traffic at Naples increased by 6.1% in the month. www.baa.com

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Kazak flag carrier gets ready for Embraer

AIR ASTANA, the flag carrier of the Republic of Kazakhstan, which is 49% owned by BAE Systems Plc, experienced strong growth during the first half of 2010, with passenger numbers increasing by 14% and revenue jumping 24%.  The airline serves Heathrow twice weekly from Almaty, as does bmi, on non-competing days.  Flight time is about the same as New York, which is around seven hours.  The airline says that improved aircraft utilisation has enabled it to increase frequencies on domestic trunk routes from both Astana and Almaty, with international service frequencies being improved to Frankfurt, Baku, Urumchi, Beijing and Kuala Lumpur.  New Embraer 190s will arrive from early 2011.  Airline President Peter Foster will be guest speaker at the UK Aviation Club in London on 16 September. www.airastana.com

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Oxford Airport to host executive jet event

LIGHT JETS EUROPE (LJE) will take place for the fourth time at Oxford Airport, 23/24 September 2010.  Some of the most senior people in the industry will be speaking during the two day gathering which involves considerable networking.  The event will cover all aspect of executive jet operations from purchase, through operations, crewing and the legal minefield.  LJE 2010 has been expanded to include a larger exhibition and static display.  Debuting is likely to be the Embraer Phenom 300, with the European deliveries scheduled for later this year. www.miuevents.com/lje10

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South American airlines get together

LAN and TAM, South America’s largest airlines, broke the news late last Friday that they are seeking a merger.  LAN is part of oneworld, whilst TAM only joined Star Alliance earlier this year.  The grouping would create a new regional powerhouse to help meet booming demand for air travel in Latin America.  The proposed combined company flies to 115 destinations in 23 countries and would employ some 40,000 staff.  The provisional name is Latam Airlines Group.    LAN's Chief Executive Enrique Cueto will be the CEO of Latam Airlines, while TAM's deputy chairman Mauricio Rolim will be the chairman of the combined company. The airlines' brands will be kept separate and in a conference to the media call the senior officers said that they hoped to complete the merger in twelve months time. The whole package at this stage is non binding. www.tamairlines.com www.lan.com

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Toronto International gets free wi-fi

PORTER AIRLINES, at Toronto City Airport, is seemingly having an effect at bigger neighbour Toronto Pearson International, proving the value of competition.  Users of Canada’s largest airport will no longer have to pay for use of the internet, something passengers at Billy Bishop Toronto City Airport have got used to since Porter Airways introduced services in October 2006.  The airline recently ordered four more Bombardier Q400 aircraft which will bring its fleet up to 24.  Interestingly Porter’s Q400s operate with just 70 seats rather than the normal 78 due to performance restrictions at the airport.  It makes for a more comfortable cabin. www.gtaa.com www.torontoport.com/airport.asp

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ON TOUR: American business travellers meet

The National Business Travel Association (NBTA) – claimed to be the world’s premiere resource for corporate travel professionals – reported increased attendance over the previous year at its International Convention & Exposition, held last week in Houston, Texas. 

More than 5,800 corporate travel professionals from 40 countries, including more than 1,200 travel buyers, filled the George R. Brown Convention Center, which hosted over 65 education sessions and displayed more than 400 exhibitors on the Expo floor. 

NBTA President & CEO Craig Banikowski, said: “The general consensus at this year’s Convention was clear – business travel is coming back!  Many attendees reported increasing levels of travel, and they came to the NBTA Convention to learn about the latest industry trends in a new economy and network with the largest gathering of corporate travel professionals in the world.  Corporate travel drives economic success, and when travel professionals are making connections and making deals, it’s a sure sign we’re on the way to recovery.”

Over four days attendees took advantage of education seminars in which industry experts and specialists from all sectors of the corporate travel community discussed business travel growth in a new corporate culture of strategic cost containment.  New resources, such as white papers on hotel programme metrics and risk management/traveller tracking systems, were offered to Convention delegates, along with reports on the global business travel market, US traveller taxes and corporate travel policies.

At the first-ever Travel’s Value Chain CEO Panel, attendees heard from Carlson Wagonlit CEO Douglas Anderson, Southwest Airlines CEO Gary Kelly, Starwood Hotels & Resorts Worldwide CEO Frits van Paasschen, and Travelport CEO Gordon Wilson.  The four industry leaders discussed and took questions from the audience on the prospects for business travel in the coming years and evolving business models.  The popular Airline CEO session also returned, with insights into the current state of global aviation and hot topics such as ancillary fees and tarmac delays from Etihad Airways CEO James Hogan and Continental Airlines CEO Jeffery Smisek, who discussed the pending merger with United Airlines.

Former US Secretary of State Condoleezza Rice enlightened attendees with insights into current global affairs during the Monday General Session, and Sir Richard Branson, founder of the Virgin Group, spoke about the value of travel, customer care, and the important role of passion in business success.  Champion cyclist Lance Armstrong addressed delegates, sharing his inspiring story of perseverance and achievement despite challenges, as well as improving the world through active citizenship.  He also told the audience he believes travel is all about personal interaction.

NBTA’s Banikowski commented: “The world is changing, and travel is changing with it.  In discussions this week with industry icons, travel professionals, and leaders in politics, business, sport and social activism, it’s clear that corporate travel is necessary now more than ever.  Travel is a ‘must’ to keep business moving forward around the world, and this week the corporate travel community came together to ensure it is accomplished as effectively and efficiently as possible.” www.nbta.org

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