19 MARCH 2012

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Article from BTNews 19 MARCH 2012

COMMENT: Thoughts for the Chancellor - The goose cannot keep laying the golden egg

On Wednesday the Chancellor will unveil the 2012 UK Budget.

There is one thing that can be guaranteed.  A great many people will not be happy with his utterings.  At least in a Coalition the government will only have one party opposing whatever he comes up with.

We endorse a statement published today by more than 25 leading chief executives from aviation, tourism and the unions urging the Government to re-think it’s planned Air Passenger Duty (APD) rise. The CEO’s describe the Government’s planned double inflation (8%) increase in APD - that the Chancellor will confirm in Wednesday’s Budget – as “short-sighted and ill-considered and will place the UK at an even greater competitive disadvantage.”

AERBT would like to ask a question.

No one from the Treasury has yet explained why Air Passenger Duty (APD) is based on the capital city of each country when tickets now often include the mileage of the route, and OAG, the airline industry’s bible, gives this detail for every airport pair.

Perhaps someone can come back and tell us?  Washington is 3,662 miles from London and Honolulu 7,223, both in the same country.  Barbados is in the next band but is 4,205 miles away.  To fly to the Pacific beaches cost £130 in taxes and those of the West Indies £160  (per person).

Back in 1991 Eva introduced Premium Economy followed by Virgin Atlantic.  Initially it was pretty basic but the latest versions, and Air New Zealand is a good example, is a fine product with quality catering and specially designed seats, the pitch just over 40 inches.

And this is the rub.

40 inches is the cut off point.  Premium Economy, Business Class and First all pay the same tax.

Why has the Treasury chosen that figure?  Is the same person responsible for the capital city APD mileage charge?  Or are there two people in the Treasury making crazy decisions.

There is a way out for the Chancellor.  It will only bring a small amount of relief to the industry but at least the Coalition will claim to be listening.

Make the cut-off point 45 inches.  Airlines that have spent a fortune on Premium Economy will then at least have a product that is possible to sell.  The utility carriers (ie what we used to call charter airlines) could re-introduce a product dropped due to a lack of demand.  True it will only be a gesture but at least Government can say that it is helping the industry.  The goose cannot keep laying the golden egg.

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