13 SEPTEMBER 2010

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Article from BTNews 13 SEPTEMBER 2010

COMMENT: The airport tax

AERBT is sorry to have to return to the issue of Air Passenger Duty (APD) but the matter is of such vital importance it needs to be aired time and time again. 

Unless the Chancellor has a change of heart in the October Treasury review, APD will dramatically rise from 1 November (again).  At least his Department has admitted it is not an environmental tax but a pure revenue cash cow!

Cost conscious travellers (and high yield business travellers in particular) will find much cheaper alternatives to the UK.

That it is likely to prove to be counter productive is a generally accepted view.

Other countries, in particular Belgium and Holland, have rejected the tax.  Both will benefit from passengers diverting from Germany and the UK.  Their view is that increased transit traffic will more than make up for any duty levied.

Have you noticed the amount of noise generated by certain airlines in respect of APD?

Virtual silence!

Why?

Because APD actually generates revenue for the airline.

Cancel your flight, or fail to turn up.  Do you make a claim for the return of the duty paid?  The airlines make it too expensive. 

According to a WHICH survey the worst offenders were found to be Jet2.com, charging £40 per transaction, while Flybe and bmi charge £25 per person.  The British Airways cost is between £15 and £30 per person, and Ryanair £15 each individual.  Monarch and Thomson Airways each require £25 per transaction, regardless of the number of passengers on the booking.

Easyjet was the only airline in the survey that did not charge an administration fee for reclaiming APD.

Take an airline with a single class operation moving 70m passengers annually.  Let us say that 40% of that number is UK generated, and it is split 50/50 between outgoing and incoming passengers.  14m passengers taxable.  At a guess 5% don’t travel for one reason or another.  700,000, but it could be as many as one million.  Within Europe (ie less than 2,000 miles capital to capital) the new fee is £12 but with Tel Aviv and Cairo now within the focus of the budget airlines APD will be £45! 

Our guess is for a 70m-passenger airline the tax not passed on will be between £12m and £15m, not an insubstantial figure.

There are two ways around this problem.

Install departure tax machines at the airports.  The cost in relation to income is insignificant and transit passengers will not be hit by a totally unfair tax.  The Treasury receives its money instantly.  From an airline marketing point of view it keeps the visible cost down.

An alternative is to change the function of APD.  Make it an inclusive booking tax rather than a departure tax. 

Only if the booking is cancelled is the tax not passed on to Government.

It is a separate issue, but the current practice of airlines charging extra for taxes and fees is totally immoral.  Taxes are one thing, but the so-called fees are just operational costs that should be part of the fare.  Any breakdown needs to note the duty separately.

The Treasury is just as bad as the airlines in concealing the tax situation.

Go to HM Revenue & Customs and you will find all the details set out in civil service language including the current charges.  The November 2010 costs are not noted.  Visit HMRC.  For whatever reasons the new taxes are not in the simple form of the previous document but have to be downloaded as a PDF.  Not easy.  Much better to visit Wikipedia where it is all set out very clearly.

This government is likely to destroy the UK’s once thriving air transport industry.  The Transport Minister is largely invisible and silent on aviation matters and his deputy, who held the position in opposition, seems opposed to air transport.  Perhaps she takes her holidays by train.

AERBT will again repeat its view.  The Chancellor should review the situation and cancel/postpone the November tax hike.  He should take into consideration the 2012 EU Emissions Trading Scheme which will not single out the UK.  And use the Conservative Party Conference to establish grass root views.  At the end of the day the duty rise was signalled by the previous administration and a change of view will cause no embarrassment.

Malcolm Ginsberg

Editor in Chief

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