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23-Jun-2010 9:41 AM

UK Government delays decision on Air Passenger Duty reform

UK Chancellor of the Exchequer, George Osborne, announced plans to delay the UK Government's final decision to adjust the Air Passenger Duty (APD) to a per-plane duty (PPD), planning to first launch a public consultation to "explore changes" to the tax (telegraph.co.uk, 22-Jun-2010). A final report on the matter is likely to be published in autumn 2010. The ADP remains scheduled to increased from GBP22 to GBP24 on short-haul flights, from GBP90 to GBP120 on flights between 2001-4000 miles, from GBP100 to GBP150 on flights between 4001-6000 miles and from GBP110 to GBP170 on flights over 6000 miles. The tax has already risen by 325% since 2006.

  • Airline responses:
    • Air Transport Users Council stated it accepts that the "polluter must pay" but a 33% rise in revenue seems "over the odds".
    • The Board of Airline Representatives in the UK (BAR UK) claimed (22-Jun-2010) the failure of the government to rule out the proposed per-plane tax in its budget shows that they do not have an effective plan for the industry and that the planned tax will fail its environmental and economic objectives and drive trade and tourism to competing countries. BAR UK seeks to work with government but will continue to lobby for fairness in taxation and challenge their lack of commitment to the aviation industry. [more]
    • British Airways stated the tax would "significantly" damage the UK's economic competitiveness.
    • European Regions Airline Association (ERA) welcomed (22-Jun-2010) the postponement, stating the proposed tax risks penalising British passengers who need to make a connection between flights. [more]
    • easyJet welcomed the government's plans to commence reform to the tax.
  • Airport responses:
    • Airport Operators Assocation (AOA) Chairman, Ed Anderson, stated (22-Jun-2010) the association remains concerned over the government's plans to introduce the per-plane duty welcomed plans to consult the industry first. [more]
    • Newcastle International Airport expressed (22-Jun-2010) concern over the government's plans to switch the APD to a per-plane duty. [more]
  • ABTA welcomed (22-Jun-2010) the move but is disappointed that the Nov-2010 increases in the APD will still go ahead, meaning revenue will increase from GBP1.9 billion this year to GBP3.8 billion in 2015-16. [more]

BAR UK: "A per-plane tax (PPT) would place an excessive burden on the UK's vital aviation industry and is completely out of touch with the country's urgent need of visionary policies that meet business and environmental objectives in the decades to come. PPT is not a new idea; the budget announcement completely disregards the industry consultation responses to similar proposals made by the last government. Huge market distortions will be created, emissions would increase and Treasury's own revenues would decrease, so failing Government's two key objectives with this tax. The PPT would lead to the destruction of the UK's long-standing position as the leading global transportation hub. This government needs to finally recognise the huge social and economic value that hub airports bring and the current policies are a contradiction with government's own aspirations to trade our way out of national debt. The combined effects of aviation tax policies and the ban on any new runways in South East England will be so great that travellers will be encouraged to by-pass the UK and give their business to the fast-developing hubs elsewhere in Europe and the Middle East, resulting in more connecting flights and additional emissions. The Treasury will stand to lose millions as a result of projected passenger and cargo growth moving to neighbouring countries. In addition, the Government's refusal to remove the existing Air Passenger Duty (APD), or PPT, with the introduction of the EU Emissions Trading Scheme (EU ETS) in 2012 means that the UK will be double taxed on aviation. Air travellers will be taxed at such exorbitant levels that UK residents will be priced out of flying and overseas visitors will choose to visit other countries instead, resulting in further damage to the UK's global aviation position," Mike Carrivick, CEO. Source: Board of Airline Representatives in the UK, 22-Jun-2010.

British Airways: "We continue to believe such a tax would significantly damage Britain's economic competitiveness without bringing any practical environmental benefit. A per-plane tax would be particularly bad news for air passengers in the UK regions and would also be likely to reduce the range of long-haul destinations served directly from the UK's national hub airport, Heathrow," Spokesperson. Source: telegraph.co.uk, 22-Jun-2010.

European Regions Airline Association: "The clear winners of a per-plane tax using this model would be airlines that do not offer their passengers connections within the UK. The losers would be the millions of passengers who need to travel from UK regions which do not have non-stop flights to their chosen destinations. The economic effect on those regions would be significant as some inbound customers would undoubtedly choose cheaper flights to different destinations. I welcome the government's announcement of a public consultation before pressing ahead with this initiative which could so easily become another government disaster," Andy Clarke, Adviser Air Transport Policy. Source: European Regions Airline Association, 22-Jun-2010.

easyJet: "Four out of five British travellers would be better off under a per-plane tax. Private jets, cargo aircraft and travellers changing planes in Heathrow will start paying their fair share," Andy Harrison, CEO. Source: telegraph.co.uk, 22-Jun-2010.

Airport Operators Assocation: "We will work with the Government to ensure that the impact of a per-plane duty on the viability of routes and regional connectivity will be minimised. From 2012, aviation will enter the EU Emissions Trading Scheme, a cap-and-trade scheme where the industry will have to pay for any emissions over its cap. We believe this to be the most credible approach, short of a global deal, to tackling aviation's environmental performance. Unilateral taxes should be phased out after 2012," Ed Anderson, Chairman. Source: Airport Operators Assocation, 22-Jun-2010.

Newcastle International Airport: "We are pleased that the Government has made a commitment to consult and we will play a full part in the consultation process. We are firmly of the view that switching the form of tax would prove to be a mistake. Air Passenger Duty is already at a level that regional air services are finding difficult to withstand, but a per-plane tax would be even worse. It will not only further suppress demand, but it will also start to distort the marketplace. The new tax would specifically disadvantage regional services, threaten direct long-haul services, and damage UK air freight. Added to this, of course, we are still navigating the effects of the recession and the recent volcanic ash crisis," Graeme Mason, Head of Planning and Corporate Affairs. Source: Newcastle International Airport, 22-Jun-2010.

ABTA: "It is now up to us to make sure we brief and have full and detailed discussions with Government Ministers and civil servants before George Osborne reports back in the autumn. While we broadly welcome the proposed switch from Air Passenger Duty to per-plane duty, it is essential that the levels and the mechanisms are set correctly so that ordinary people are not taxed out of flying. We have already held a meeting with Justine Greening - the Treasury Minister taking the lead on aviation taxes - and we will ensure that we continue to meet with her team to fully brief them on our sector. Travel matters to our economy - aviation contributes more than GBP11 billion in GDP - to jobs - 700,000 British jobs depend on aviation - and the welfare of hardworking people - nearly 40 million holidays were taken abroad in 2009 by British citizens. If George Osborne wants everyone to know that the 'UK is open for business' then it must be affordable for people to get here and depart. Tax on aviation, through Air Passenger Duty, in this country has risen disproportionately over the past five years. We all know that George Osborne has to balance the books, but to maximise the tax take on aviation, they must set it at a level where people can still afford to fly, not tax people out of the skies," Mark Tanzer, CEO. Source: ABTA, 22-Jun-2010.

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