Posted on: 30 October 2018 by Mark Howells
LARA editor Mark Thomas summarises the latest happenings across the low-fare and regional aviation industry.
The subject of Air Passenger Duty (APD) in the UK is a sore point for the commercial aviation sector, and the latest budget unveiled by the country’s Chancellor has done little to ease the pain.
With the UK still painfully groping its way towards Brexit, the industry had been looking forward to learning what strategy the government would employ. That had included the hopes of airlines and airports that there might be a planned reduction or even the complete abolition of APD, standing as of April this year at £78 per economy long-haul flight – a significant figure for long-haul low-fare carriers to have to factor in when already dealing with wafer-thin margins.
Sadly, what the industry got were plans for more inflation-linked rises in APD for long-haul passengers as of April 2020, with the duty to remain frozen at its present level of £13 per adult for short-haul. Hardly the early Christmas present it had been hoping for.
The UK travel association ABTA was clearly unimpressed, with its chief executive, Mark Tanzer, commenting: “While we recognise that the Chancellor’s freeze on short-haul APD will come as some relief to the industry, another inflationary increase for long-haul will further reduce the UK’s international competitiveness, particularly at a time when Brexit means the UK should be seeking to establish new links with destinations across the world.”
He urged the Chancellor to commission detailed economic modelling and to consider “cutting APD at the earliest opportunity.”
The owner of British Airways, IAG, said the tax hinders its efforts to fly to new trading markets. “It’s ironic that this Brexit budget has undermined Britain’s global competitiveness by upping APD, the world’s highest aviation tax, again,” it stated. “Last year, British Airways’ passengers paid £682 million in APD. We want to offer more flights to key trading markets, like our European competitors, but APD stifles route development to new emerging markets.”
It also called the tax “outdated” and reiterated the call for it to be scrapped, a view also echoed by Virgin Atlantic, which commented: “The government has missed a crucial opportunity to lower the cost of long-haul air travel for UK businesses and holidaymakers by cutting APD. Our customers are already paying the highest rate of long-haul APD in the world – twice that of any other EU nation – simply to depart the UK.” APD now accounts for more than a quarter of its lowest fares, it added.
The Board of Airline Representatives (BAR), meanwhile, branded the news “beyond the comprehension of airlines.” It continued: “The budget was the perfect opportunity for the chancellor to boost economic growth through stimulating long-haul connectivity to vital existing and new long-haul markets. The freeze in the short-haul rate is a token gesture that cannot offset the damaging impact of increasing what is by far the highest air passenger tax in Europe.”
Karen Dee, chief executive of the UK Airport Operators Association, pointed out that last year the UK “was the only country in the EU that saw a decline in direct aviation connectivity.” She said that aviation connectivity would be vital during and after Brexit, and that APD remains “the biggest barrier to growing that connectivity.”
The editor’s comment is published weekly as an accompaniment to the LARA e-newsletter. If you do not currently receive our email updates, you can subscribe here.