1-Nov-2010 2:45 PM

UK travel industry unites against new APD

UK’s aviation and tourism industry has voiced concerns about the UK government’s new Air Passenger Duty (APD) on the eve of its introduction on 01-Nov-2010 (Bloomberg/News.com.au/Trend, 29-Oct-2010). Various industry stakeholders warned many families would be "priced out" of travel. They claim the tax will damage the UK economy, make Britain a less competitive place to travel to and from and is disproportionately unfair to travellers. In a joint statement, executives from BAA, Virgin Atlantic and bmi stated the APD rise will undermine the government's policy of strengthening business links with the rest of the world, since competing hubs like Amsterdam have no such charges at all. ABTA stated that British citizens now pay the highest APD of any nation. ABTA encouraged the UK government to drop the APD, stating the Dutch Government axed their version of APD in 2008 after learning that the damage to their economy vastly outweighed any revenue raised by the tax. Details of the APD increase include:

  • The four levels of APD: Band A for sectors up to 3,200km; Band B or up to 6,450km; Band C for up to 9,650km and Band D for all sectors beyond that;
  • Tax increases in economy class: Band A - 9% increase to USD21; Band B - 33% increase to USD98; Band C – 50% increase USD122; Band D 55% increase to USD138;
  • All premium class (premium economy, business, first) passengers pay double those amounts.

Virgin Atlantic stated the new APD will add GBP450 million (USD717 million) to the price of family vacations in 2011. To demonstrate its impact, the airline showed that the average vacation to Florida for a family of four travelling on an economy package will increase by GBP240.

BAA CEO, Colin Matthews, said London Heathrow may become less competitive against other European hubs and demand for long-haul leisure flights to the city may be hurt because of the tax increase.

Skyscanner CEO, Gareth Williams, also suggested the increases could lead long-haul travellers to fly from airports elsewhere in Europe. He stated, "in a recent survey we found that more than three-quarters of our users would be willing to fly indirectly to save money … It could have serious repercussions for the long-haul UK aviation industry.''

easyJet stated (29-Oct-2010) that the APD tax will have increased by 140% since 2007. The LCC said the APD is a "bad environmental tax as there is no relation between the level of the tax and the level of emissions and easyJet" [more]

Virgin Atlantic: "Given the forecasted rises in APD over the next five years, all travellers will be more than paying their fair share and in fact contributing more to the Treasury than the banks via the new banking levy … Holidays are an essential part of our lives and are valued even more in these difficult economic times. With passengers now being asked to pay up to 10 times more tax since APD's introduction, the annual family holiday will become unaffordable for many. This absolutely has to be the last time that the travelling public faces APD rises." Julie Southern, CCO. Source: Bloomberg, 29-Oct-2010.

BAA: "While we must all play our part in the recovery, we need sensible tax policy that doesn't stunt growth and damage our competitiveness as this does. Ultimately, increasing APD will hurt consumers and businesses alike as it makes it more expensive to fly from the UK compared with other countries … The knock-on effects of this will be longstanding and bigger, more environmentally-efficient jets will not be able to fly from our airports if passengers decide they can only afford to fly long-haul from our European neighbours instead." Colin Matthews, CEO. Source: BAA, 29-Oct-2010. [more]

easyJet: "The Government should reform Air Passenger Duty to make it fairer for the public and to encourage greener behaviour by airlines. APD is already higher in the UK than anywhere else in Europe and UK passengers and the environment would be better off if the tax was shifted from per person to a per plane tax." Carolyn McCall, CEO. Source: easyJet, 29-Oct-2010.

BAR UK: "The effect of the increases on destinations such as the Caribbean have now reached the point where it is the equivalent of a family group paying for four tickets but only receiving three. BAR UK has campaigned tirelessly against these excessive and unfair taxes. Air passengers are being discriminated against and the economy will suffer. BAR UK is calling on the Treasury not to implement any further increases since the airline industry and its customers cannot afford the international competitiveness of the UK to slide any further." Mike Carrivick, CEO. Source: BAR UK, 29-Oct-2010.

bmi: "We are extremely disappointed that the Government has chosen to increase tax on air travellers at a time when we should be encouraging people to travel. UK businesses and leisure travellers depend on good connectivity on shorter and longer routes. This tax increase will seriously disadvantage air travellers departing from the UK." Wolfgang Prock-Schauer, CEO. Source: Trend, 29-Oct-2010.

British Airways: "The government will be careful not to undermine the general economic recovery, especially if they expect the private sector to fill the gap in terms of losses of jobs in the private sector … More and more people are saying it is becoming expensive to do business in the UK." Willie Walsh, CEO. Source: Guardian, 29-Oct-2010.

ABTA: "For too long our customers have been taken advantage of with successive governments seeing flying as a convenient cash cow. These latest huge increases in APD will disproportionately affect families on tight budgets when they are under considerable financial pressure. Not only is this tax increase pricing people out of taking holidays, it also is putting the UK at a clear competitive disadvantage when compared to our European competitors." Mark Tanzer, CEO. Source: ABTA, 29-Oct-2010. [more]

CBI: "The big rise in air passenger duty coming into force next week will hit tourists and business travellers alike, with some facing a 55% increase in tax on their ticket price. This could discourage foreign visitors coming to the UK as the tax affects them when they leave the country, hitting British tourism and trade. The Government needs to consider what impact such taxes will have on the aviation industry’s competitiveness in what is a truly global market. The increase comes at the end of a tough year for the aviation sector in which it has faced the volcanic ash cloud closing European airspace for several weeks, and the global recession in which UK air passenger levels dropped by 7%." Neil Bentley, Director for Business Environment. [more]

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