27 APRIL 2009

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Article from BTNews 27 APRIL 2009

COMMENT: Air Passenger Duty - What a mess Mr Chancellor

“You ain’t seen nothing yet.”  That was the message that the Chancellor failed to put out during last week’s budget speech.  Not a single mention of the increases in Airport Passenger Duty (APD) he himself had announced last November, 12 months ahead of implementation.  A very, very embarrassing silence.  Chancellors do not admit mistakes.  The opportunity was there to rejuvenated Britain’s airports and airlines and remove this most unfair of taxes.  

It is going to get worse.

If you thought times were grim as a common citizen under this present government, as an air traveller you might find yourself walking.  It would seem that Downing Street wants to destroy one of the UK’s most successful industries, the air transport business.  Unless there is a complete rethink, or a change of government, by the end of 2010 London and Heathrow will no longer be the hub of the world’s airlines.  The long-term consequences for the country, and its capital city, will be serious, and far far greater than the modest income, by government standards, that the taxes bring in.  Less people will fly, fares will go up to compensate, and more will choose to bypass London.  Frequencies will be reduced and staff most certainly be laid off.  

The government of the Netherlands has announced that it will scrap its airport tax as part of an overall economic support plan to encourage airlines to re-route.  Go via Amsterdam is the call.  We are doing the opposite.  

Besides the APD increase, some holiday visa charges have reached horrendous levels.  For a South African couple from Cape Town coming to Britain on holiday with two children the minimum government charges they will have to pay is UKP600.  To this must be added the cost of flights and their stay.  No wonder Paris is booming as London dies.  We should be flying the flag for the Olympics.  They will be with us at the most for six weeks.  To really benefit we should for the next three years be showing visitors how London is being rejuvenated.  We are doing the opposite, financially scaring would-be tourists away.

The actual APD figures are produced below.  You just have to sit back and take them in.  Previously air passengers were not taxed.  Nor were rail users, and of course they are still not, the same situation going for passengers on long distance coaches and ferry patrons.  

Blame for the initial levy must be apportioned to the airlines who should have seen it coming and failed to lobby at the highest level.  You have to wonder, when Lords King and Marshall led the industry, and Sir Michael Bishop was at his prime, would it have happened?

For flights up to 2,000 miles (which effectively means Europe) the economy class tax will go up 10% in November and a further 10% 12 months later, or 20% in two years, giving a one way charge of UKP12.  With the fees for using the terminal your flight will cost something in the order of UKP25 before boarding the aircraft (dependent on the airport).  Business class passengers will pay UKP24 APD.

If the capital of the country you are visting is up to 4,000 miles (which includes Montreal, Washington and Tel Aviv), the fee will be UKP60 economy/UKP120 premier classes by the end of next year and if you are going a really long way, say to Buenos Aires or Hong Kong non-stop the charge will be a colossal UKP85/UKP170.  But not for Hawaii USA - see Washington.  And it has to be assumed that a minister or civil servant, naturally flying First Class, must have taken a walk around the aircraft and discovered Premium Economy.  Sir Humphrey, or whoever, would have rubbed his hands together.  “These people need to pay a supplement too.”

For a typical family of four at the back of the aircraft flying to the Caribbean, Kenya, South Africa or Thailand next winter, the APD charge will be UKP300.  Some operators will find it cheaper to fly via an intermediate point than operating non-stop, environmentally a mistake.  If this family are flying via Heathrow from a regional point they may have to pay APD twice.

It does appear that this government does not understand economics and the free market principals.  It also has no appreciation of what is happening to the airline industry.  Our story (see below) relates to SAS and its loss of traffic.  Next British Airways?  

Alistair Darling was a popular and thoughtful transport minister.  On one occasion he was pelted by a person opposed to aviation.  Some of the most senior persons in the industry were quick to wipe him down and ensure that the press conference continued.  One wonders if they would be so fast to assist the Minister now!

Malcolm Ginsberg

Editor in Chief

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