24-Mar-2011 9:30 AM

UK aviation industry responds to UK budget

UK airport and airline bodies have welcomed the UK's budget, but many stated there is still significant room for improvement in government policy towards to industry. Chancellor said that "with the cost pressures on families, we think it would be fair to delay this April's air passenger duty rise to next year." The government confirmed plans to charge APD on a per plane, rather than a per passenger, basis had been dropped because they breached international law (The Guardian, 23-Mar-2011). The Chancellor confirmed private jet operators would be required to pay APD, stating "the wealthiest should not escape the tax the ordinary holidaymaker has to pay."

Responses include:

  • Air Passenger Duty (APD): 
    • BAA CEO Colin Matthews stated (23-Mar-2011) the freeze in APD "will be a welcome relief" for all UK travellers. "We have to remember that air taxes don’t just hit holidaymakers," Mr Matthews said, "they also hurt the competitiveness of London as a world city, and without sufficient levels of tourism everything will suffer";
    • Robin Hood Airport Doncaster Sheffield welcomed (23-Mar-2011) news of the APD freeze but warned that passengers still face the prospect of 'double taxation' and "further increases in taxes when aviation enters the EU Emissions Trading Scheme in 2012";
    • The Airport Operators Association "cautiously" welcomed the APD freeze, and called on the government to "emulate the decisions of European competitor nations to reduce or abolish APD in the UK". The AOA also stated "there should be no double taxation of British aviation”;
    • Peel Airports, which operates Liverpool John Lennon Airport, stated that "this is only the beginning and we urge anyone who travels by air, both on business or leisure, to continue to lobby Government further";
    • ABTA welcomed (23-Mar-2011) news the government will review "the arbitrary and illogical" banding system which sees services to the Caribbean taxed at a higher rate than longer services to the West coast of the USA. "It is good news that he [Chancellor George Osborne] has recognised that the current system of aviation taxation has structural flaws in terms of banding and premium economy. We will now be reviewing the details of the consultation and the proposed tax changes to make sure that changes to the way APD is collected is not used as a cover to increase taxation further";
    • The Board of Airline Representatives in the UK (BAR) stated (23-Mar-2011) the government "is still not listening to the industry’s calls for a fairer tax", saying freezing APD "does not go far enough". BAR also warned of "double taxation" due to the APD and the aviation industry's inclusion in the EU ETS from 2012. "This unfair tax (APD) will further erode the tourism industries of countries abroad," said CEO Mike Carrivick, "many of which are in developing nations.”
    • IATA CEO Giovanni Bisignani welcomed (23-Mar-2011) the APD freeze saying the government "has begun to address the falling competitiveness of the UK aviation sector - at least by not making the APD situation worse." Mr Bisignani said "much more" needs to be done to address problems with taxation problems in the UK, which "are still the highest in the world." IATA also welcomed the Chancellor’s decision not to convert the “per passenger” APD to a “per plane” tax, "which would have eroded UK competitiveness";
    • Manchester Airports Group external affairs director Jonathon Bailey said the group is "pleased that the Government has recognised the limitations in the current tax system and that they will be looking at regional variations in the forthcoming consultation." Mr Bailey added MAG welcomes the APD freeze, which he expects will "giving us vital breathing space to grow our industry again." "We will now focus our efforts on convincing the Government that a regionalised tax system could work in the long term and provide a stronger aviation industry for the UK," Mr Bailey added.
    • PricewaterhouseCoopers partner Mark Schofield warned that inflation-linked tax increases would not be enough to meet the government's fund-raising targets and said that big rises in the future "could be likely";
    • ABTA chairman John McEwan also warned that a "much bigger" increase in APD is likely for 2012, noting that the Chancellor has not changed the government's forecasts of APD contributing GBP3.6 billion by 2015.
    • The British Air Transport Association (BATA) said "it is spin to claim it [a increase in APD] has been deferred. We never knew there was due to be a rise."
    • easyJet called for the tax to be imposed on transfer passengers and accused the government of going back on its pledge to make APD "fairer and greener". easyJet is in favour of the per plane tax.
    • Charles Stanley analyst Douglas McNeill stated the the government appears to have succumbed to fears that a per plane tax would greatly damage transfer traffic, which is important for London Heathrow;
    • Ryanair criticised the Chancellor's plans to boost economic activity in the UK by reducing corporations tax without scrapping "'unjustified and unfair tourist taxes". The LCC stated the budget "proves that yet another UK government has no tourism policy."
  • Measures to support growth: BAA's Matthews said the UK economy "will remain fragile for some time to come", and BAA welcomes moves to support enterprise. Mr Matthews said that the "right trade links with emerging markets connections...will only come through a hub airport like Heathrow". [more - BAA] [more - Doncaster Sheffield and AOA] [more - ABTA] [more - IATA]

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