25 SEPTEMBER 2017
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Of all the many present causes for concern in our industry, one stands out. It is the vexed question of Air Passenger Duty, or APD. And it is back in focus thanks to major interventions last week led by Heathrow.
The unnecessarily-complicated and iniquitous burden on airlines and their passengers was introduced in 1994, disguised as a trendy eco-measure which would help to save the planet. The more cynical among us could be forgiven for seeing it instead as just another money-grabbing exercise by the government in power at the time. Perish the thought.
Whatever the truth, the tax, which started out at £5 for short-haul flights and £10 for long-haul flights, has been raised repeatedly by successive governments, the last time with effect from 1 April 2016, by which time the various tinkerings had resulted in a levy on short-haul flights of £13 for Economy class and £26 for the front end. The cut-off point now is 40in seat pitch, above which it is considered premium travel. To make it even more complex certain Scottish and Welsh ‘public service’ routes are exempt, as is the second leg if you are connecting at a UK Airport.
Long-haul was tidied up with 2,000 miles plus considered the rule for long-haul. The rates are now £73 and £146.
Such manoeuvres, which could be seen as little more than a sop to an increasingly-angry industry, are reflected in the way APD has been variously twisted and turned in relation to young passengers.
And you can say why 2,000 miles. Only the Treasury knows. Did they speak to the CAA? Tel Aviv is flown by British Airways, easyJet, Monarch and Wizz as crew day return sectors, hardly long-haul. Ankara and Beirut are much the same distance.
The very unfair children’s taxes have been eliminated.
We are told that in late Victorian times children of 12 could legally leave school and go out to work. In 1918, full-time education became compulsory for children up to age 14. The 1944 Education Act raised the leaving age to 15 and in 1964 it was announced it would be raised further, to 16, although the measure was not put in place until 1972.
The fact is youngsters aged between 12 and 16 are legally bound to do schooling. For their parents, this is a very expensive time, made worse by the well-documented debate about travel prices increasing during school holidays. There are now tax exemptions for all up to 15 on the day of travel whatever the class.
It was a small victory but, again, looked like a sop, failing to address the main question. With this year’s Autumn Budget due on 22 November, it is to be hoped Heathrow’s move, in which the airport in a letter to chancellor Philip Hammond, has urged the government to scrap domestic APD, will have some effect.
The airport quoted new research from Frontier Economics which it said revealed UK passengers are paying an extra £225m in aviation tax on domestic flights compared to many of their European counterparts. The proposal is part of a new nine-point plan called Bringing Britain Closer which airport bosses say includes “practical, deliverable and binding plans” to connect more of the UK to global growth and prepare the economy outside London for Brexit.
Like Airlines UK, the Airport Operators Association and many other critics, Heathrow notes UK APD is the highest tax of its kind in Europe, with most European countries having little to no levy on internal flights because they want to boost their economies and support domestic industry.
The Heathrow letter adds: “Abolishing (APD) for domestic flights would level the playing field with Europe. The research from Frontier Economics shows removing APD on all domestic flights would save UK passengers up to £225m annually and boost the country’s overall GDP by facilitating greater connectivity between regions. The increased tax receipts from this growth is likely to mean that the impact of abolishing APD on domestic flights is revenue-neutral for the Treasury.”
Stansted’s new CEO, Ken O’Toole, also joined the debate last week during a speech to the London Infrastructure Summit. He reiterated industry calls for the reform of APD, stating that the UK has the highest rates of aviation taxation of any developed nation “by some margin”. This, he said, inhibits demand and affects the ability to compete against EU and global competitors for airline capacity.
Airports and airlines are united in respect of APD.
BTN hopes that sense will finally prevail. APD should be scrapped but the Chancellor should at least get rid of the domestic tax. Fly to London from Edinburgh for the day costs £26 APD. Go to Amsterdam and all you pay is £13 in levies! Something wrong with the system.
All comments are filtered to exclude any excesses but the Editor does not have to agree with what is being said. 100 words maximum
David Starkie, United Kingdom
At a very congested airport like Heathrow, ticket prices are determined by demand not underlying costs so if ADP was removed airlines would pocket most of the difference. That would not be the case for most other airports however. I f the Treasury could devise a way of keeping APD on LHR flights and removing it elsewhere that might have the positive economic impact that the lobbyists claim.
Barry Moss, UK
The airline industry, like a number of multinational tech companies believes it should not pay the same taxes as other businesses. Jet fuel is VAT exempt and most airlines operating in Europe currently receive 83% free carbon allowances for intra-EU flights. Train operators, except those using renewable energy, have to pay for 100% of EU ETS carbon allowances and VAT on energy costs - The airline industry has therefore little to baulk about as far as APD is concerned.