APD cuts promised in Scottish independence debate

By Martin Ferguson

The Scottish travel industry received a boost this week in the run up to the independence referendum on September 18 with promises by both sides to cut air passenger duty.

At a debate organised by Scotland’s travel trade body, the Scottish Passenger Agents’ Association (SPAA), politicians and campaigners from both the “yes” and “no” campaigns pledged to slash APD if they win the autumn vote.

Annabelle Ewing, the SNP MSP for Mid-Scotland and Fife, said if her party were elected to govern an independent Scotland it would cut the tax by 50% in the first year and eventually abolish APD if “finances allowed”.

While Ian McGill, the leader of the Better Together campaign in Edinburgh, said he would campaign for APD to be controlled by a devolved Scottish government.

Less committed was Scottish Labour MSP and Better Together campaigner James Kelly, who said he would keep “an open mind” about who should control the stealth tax.

The SPAA has campaigned against APD since its inception, claiming it was discriminatory against Scottish business and consumers who have to pay the levy twice if travelling overseas via an English airport.

The major issues debated at the Glasgow forum were EU membership and currency.

The Better Together campaign said Scotland would not automatically be welcomed into a sterling currency union with the rest of the UK and accused opponents of not having a contingency plan.

But Blair Jenkins, chief executive of Yes Scotland, said there was no contingency plan because it was “inconceivable” for Scotland and the rest of the UK not to share the pound.

On Europe, the Yes Scotland camp insisted it would be treated as a successor state as it was already part of the European Union.

Opponents to independence have claimed that Scotland would be left on the sidelines until the 28 members states voted to allow it to join.

Sourced by bbt

Iata chief hits out at APD ‘tinkering’

Air Passenger Duty remains a “drag” on the UK economy and planned changes to long-haul bands from next year are “half-hearted at best”.

Criticism of the government’s air tax came from Iata director general and chief executive Tony Tyler, who called for a comprehensive review of APD rather than just “tinkering” with the system.

“Last month, the UK government recognised the principle that its onerous APD was hurting the UK’s economic prospects – particularly its ties with emerging economies such as China, India and Brazil,” Tyler said.

“From next April, the highest bands will be eliminated. This followed reductions agreed last year to address the economic damage that APD was doing to Northern Ireland. But despite these adjustments, planned annual inflation-related increases continue.

“This latest effort is half-hearted at best. Instead of immediately addressing the economic damage of this misguided tax, the government will eliminate the highest bands from next year.

“APD is a drag on the UK economy that far outweighs even the billions of pounds that it siphons from the pockets of travelers.

“The government’s tinkering pays little more than lip service to this fact. It’s time for decisive action. Taxing a necessity like connectivity as if it were a social indulgence hurts the economy. A comprehensive review is needed,” said Tyler.

He spoke out as the organisation revealed that demand for global air travel reduced in February over the previous month but still showed an improvement over the start of 2013.

Growth in demand was 5.4% against 8.2% in January with international passenger traffic up by 5.5%.

“Although this represented a slowdown compared to the January traffic increase of 8.2%, cumulative traffic growth for the first two months of 2014 was 6.9%, which compares favorably with the 5.2% overall growth achieved in 2013,” Iata reported.

All regions except Africa experienced positive traffic growth.

“People are flying. Strong demand is consistent with the pick-up in global economic growth, particularly in advanced economies.” said Tyler.

Sourced by Travel Weekly

Analysis: Will cut in APD make much difference?

Analysis: Will cut in APD make much difference?

The Chancellor sprang a surprise with a Budget cut in APD on the longest flights. It delighted the Caribbean, but the UK’s tax on flying remains high. Ian Taylor reports

The Budget on March 19 was significant for travel and, for once, not in a negative way. Chancellor George Osborne finally responded to industry lobbying by announcing a switch to a single Air Passenger Duty (APD) rate on medium and long‑haul flights.

So the dreadful treatment of the Caribbean, taxed at a higher rate than California and Hawaii, will end from April 2015.

It is a clear retreat by Osborne, who was reported to have personally vetoed a move to simplify the current four-band system in 2011, and will be welcomed around the world.

Destinations from India to New Zealand and the Caribbean to Chile will see APD applied to UK flights at the same rate as to the US.

Four bands for a year

However, four APD bands will remain for another year and rates for all but short-haul flights will still rise next week: to £69 on an economy flight to Egypt or the US (Band B), £85 to the Caribbean (Band C) and £97 to Singapore and beyond (Band D) – with rates in other classes double these amounts.

The move to just two rates in a year’s time will see £71 APD applied to all medium and long-haul economy fares (the ‘reduced rate’) and £142 in other cabin classes (the ‘standard rate’). Rates will continue to rise annually with inflation.

Trade reaction

The Caribbean Tourism Organisation expressed delight, chairman Beverly Nicholson-Doty saying: “This is a complete victory for the Caribbean. We want to thank everyone who has supported our lobby.”

Abta head of public affairs Stephen D’Alfonso argued: “The decision vindicates the hard work, commitment and persistence shown by diverse organisations united in lobbying for a change.

“A £200 million tax cut for the sector is nothing to scoff at in the middle of the government’s deficit-reduction programme.”

However, D’Alfonso said: “Passengers will continue to face the highest taxes on air travel anywhere. Those flying domestically are still hit twice. Long-haul passengers will continue to pay more than £70 in tax. It would be wrong to interpret this as the end of the road for APD campaigning.”

Paul Wait, chief executive of the Guild of Travel Management Companies, agreed, saying: “We hope this will be the first in a series of reforms to APD.”

Virgin Atlantic said: “A two-band APD rate is a welcome simplification. We hope the government will go further.”

British Airways’ parent IAG took a tougher line, saying: “This is window dressing.”

Tax remains high

The reality is the re-banding will affect only 8% of UK air passengers, since 92% pay APD at Band A or B rates now.

But the Budget Report did appear to acknowledge APD has a negative impact, something the Treasury has previously denied, when it suggested the aim of switching to two bands was “to help British businesses strengthen links with high-growth markets and go further to make the UK an attractive option for business visitors and tourists”.

Anomalies remain, of course. Fares to Egypt will carry £71 in APD while those to Tunisia will be £13-£14.

More important, Band B APD will remain high and rates will rise in line with the retail prices index (RPI). This was 2.7% in February when the consumer price index (CPI), which the government takes as the official rate of inflation, was 1.7%.

So APD on fares to the Caribbean will fall next April, but only from £83 to £71 in economy – hardly a decisive difference. Nonetheless, it is a fillip to the sector and a climbdown by the Treasury – which will see annual APD revenue fall by more than £200 million a year.

The question is, where will the industry’s Fair Tax on Flying coalition go from here?

Editor’s comment

Lucy HuxleyLast week the chancellor George Osborne was goaded by opposition MPs during his Budget speech to pull a financial rabbit out of the hat.

With no money to give away, a pre-election bunny never materialised, but his announcement of APD reform was a victory for travel as significant as it was unexpected.

OK, so the tax remains and most travellers won’t benefit from new banding from 2015, but only the most optimistic tub‑thumpers saw him forgoing revenue in times of austerity.

After all the years of lobbying, to hear Osborne agree with the industry when he referred to the current APD system as “crazy” was vindication.

He also said: “It hits exports, puts off tourists and creates a great sense of injustice among our Caribbean and South Asian communities here in Britain.”

So the principle of the damaging social and economic impact of APD has been established and accepted at the highest level in government. The door is now surely open to go further.

Sourced from Travel Weekly

Analysis: Budget surprise, but what next for APD?

The Chancellor surprised many by placing the Caribbean into Band B of Air Passenger Duty, effectively handing £200 million back to the industry. Is abolition next? By Gary Noakes

For once, the travel industry can agree; Chancellor George Osborne got it mostly right with his surprise reform of Air Passenger Duty in last week’s Budget

From April 2015, APD will be simplified from four bands into two: Band A for short-haul flights of less than 2,000 miles and Band B for those further than this. Band B will be charged at £71 for reduced rate (economy) passengers and £142 for standard rate passengers. This compares with the 2014-15 range of £85 to £194 in Bands C and D.

Months of lobbying led to George Osborne effectively handing the industry a £200 million booking incentive – the value of the tax saved – and, equally, “a complete victory for the Caribbean” according to the region’s tourism organisation. The removal of Band C means the Caribbean falls into Band B, where the US sits, removing the anomaly whereby a flight to Los Angeles attracts less tax than one to The Bahamas.

Sticking together

Richard Sealy, Barbados’s minister of tourism and international transport, said he was struck by how the industry came together on this issue. “Our key travel industry partners were incredibly supportive in arguing with Barbados against APD while still continuing to advocate travel to our country,” he said.

The change drew predictable plaudits from operators to the region, although some doubted the extent of the benefits.

Caribtours’ managing director Paul Cleary said: “I am delighted a wrong has been put right, but it has taken all this time and damage has been done to the Caribbean, but all credit to the industry and the Caribbean Tourism Organisation.” He added: “APD per se is still too high, but it has not been killing our business.”

David Kevan, partner and director of luxury specialist Chic Locations, added: “Our average selling price is £3,000, so the discount compared with the Far East is £50-£60. It is not enough to be crucial, but it is a step in the right direction.”

He also argued the change could still prove “significant”. “It is a tax that should be abolished; this is a good start.”

Kevan believes the tax was hampering inbound tourism from key overseas markets and may have hit on one of the reasons for the change of heart, as it was probably not just the Caribbean’s efforts that led the thinking of the Chancellor.

More likely, it was the tax burden on flights to three of the BRIC countries – Brazil, India and China, that convinced him. These three are key targets as trading partners and the UK’s efforts to drive exports – and attract inbound tourists – have not been helped by placing them in Band C. From April 2015, these three BRICs will all be in the same band as their other member, Russia.

Trying to convince the government to cut taxes on flights for holiday-makers was always going to be a struggle, no matter how much the argument about penalising hardworking families going to Disneyland or those visiting their family in the Caribbean was put. What did work was putting the case for business and UK PLC, something that was hammered home by the Guild of Travel Management Companies.

A step further

Paul Wait, GTMC chief executive, said he had met with 80 MPs in the past 15 months. “We said if you want this export-led recovery, put the BRIC countries into Band B. To my delight they went a stage further.”

There remain however some dissenters, with British Airways sounding unimpressed. “It still punishes families and costs UK jobs. The only long-term solution is to scrap APD in its entirety and allow the aviation and tourism industries to flourish, to the benefit of the wider UK economy,” it said, highlighting that the campaign against APD is not over.

Indeed not. The Fair Tax on Flying Campaign, having tasted victory, has more in its sights. “We’ll focus on the overall level and the fact that APD is linked to inflation, so there is an annual rise built in,” said a spokeswoman.

“But we should acknowledge that this is an important first step at a time when the Chancellor is still in budget deficit mode. The fact that he has effectively offered £200 million is not to be taken lightly.”

Sourced from TTG Digital

APD reform will make little difference, say Global travel agents

APD reform will make little difference, say Global travel agentsBy Juliet Dennis,

Reform of Air Passenger Duty will make little if any difference to business, according to Global travel agents.

From next April the air tax will be simplified into a two band system for short-haul and long-haul flights, scrapping the two highest bands. The Caribbean will be the main winner of the change, which means holidaymakers travelling to the destination will now pay the same as those travelling to the US.

But agents quizzed about APD on stage at this year’s Global Travel Conference claimed the change – a surprise move announced in last week’s government budget – would have little impact on bookings, particularly in the luxury sector.

Travel Designers’ managing director Nick Harding-McKay said: “For what people already spend on luxury holidays, a saving here and there will not make a difference.”

But he conceded: “For people going home to see their family, this might make a difference, but this is not really our market.”

Lee Hunt, managing director of Deben Travel, added: “I don’t think it [the change in APD] will make any difference. I think the press and the government should focus on the benefits of booking with travel agents.”

Sourced by Travel Weekly

Opinion: Securing APD reform was a significant win, but the fight goes on

Opinion: Securing APD reform was a significant win, but the fight goes on

Last week’s Budget announcement vindicated the work and persistence of the A Fair Tax on Flying lobby group in putting its argument against APD, says Abta’s Stephen D’Alfonso

Last week’s Budget announcement on Air Passenger Duty was a welcome and significant move by the government.

From 2015 UK Air Passenger Duty (APD) is to be restructured with the abolition of the two most expensive bands and charging of all long-haul passengers at the lower band B rate of duty.

This will reduce the cost of long-haul flights, making destinations such as Australia, India and Brazil more accessible to Britons and vice versa, while travellers to the Caribbean will no longer face competitive disadvantage compared with destinations such as Hawaii.

It would be odd to be anything but positive in response to any step that reduces the tax-take from APD.

And this decision by Treasury vindicates the hard work, commitment, and persistence shown by the diverse organisations within our industry who have been united for a number of years in lobbying for a change and reduction to this damaging duty.

But it would also be wrong to intrepret this as the end of the road for our APD campaigning. On the contrary, it shows that when we make a compelling case, the Treasury will listen and act.

It is a significant point of progress – and one that should not be underestimated – that the government has finally acknowledged that APD is a tax that is damaging growth.

The A Fair Tax on Flying campaign has been making the case that holidaymakers, businesses and the aviation and tourism sectors are all harmed by APD, a fact borne out by a growing body of evidence, including last February’s excellent PricewaterhouseCooper report.

The government’s plans to restructure APD is an important first step towards making the UK a more competitive place to visit and invest in.

I remain convinced that these changes will help to demonstrate that Britain is open for business, encouraging more inbound tourism and giving a much needed fillip to the tourism sector.

In reforming APD, the government had to start somewhere.

A more than £200 million pound tax cut for the sector is nothing to scoff at in the restrained spending environment we find ourselves.

We should all remember that we’re still in the middle of the government’s deficit reduction programme after all. However, the Chancellor’s decision must be just the first step in a wider review of the tax, its overall level, and its impact.

We mustn’t forget that passengers will continue to face the highest taxes on air travel anywhere in Europe, and those flying domestically are still hit twice.

Long-haul passengers will continue to pay more than £70 per person in tax, a significant proportion of the overall cost to fly, whether it be for business, for leisure, or to visit friends and relatives.

Let’s also not forget we’ll have to wait another year before the changes come into effect.

So there is much more to continue to fight for to address the damaging impact of APD and Abta, along with other members of the Fair Tax on Flying campaign, is as committed as ever to making the case, and keeping up the pressure on this important issue.

Sourced from Travel Weekly

More Caribbean tourism chiefs hail APD decision

More Caribbean tourism chiefs hail APD decisionBy Phil Davies
Tourism chiefs of Barbados and Antigua have joined the Caribbean Tourism Organisation in welcoming reform of long-haul Air Passenger Duty.Richard Sealy, tourism and international transport minister of Barbados, predicted the change in the air tax bands from next year would trigger more arrivals from the UK.

The simplification of APD follows years of industry lobbying from both sides of the Atlantic.

Sealy said: “When I attended meetings with the British government together with Caribbean colleagues and the travel sector to present our case against this tax, I was impressed with how forcefully our industry came together on this issue.

“Our key travel industry partners were incredibly supportive in arguing with Barbados against the APD whilst still continuing to advocate travel to our country.”

He added: Now that the distorting impact of the tax has been removed I am confident we will be working with our same loyal and dedicated travel partners to welcome more British visitors back to Barbados in the coming years.”

Antigua and Barbuda tourism minister John Maginley said: “I am delighted that the British government has decided to remove the discrimination created by the banding in the application of the APD.

“I had the privilege of leading a delegation of Caribbean ministers of tourism as chairman of the CTO to the UK to meet and discuss the effect of the APD as far back as September 2009 where this proposal was first made.

“It has taken some time for this to happen but in the end it will be beneficial to Antigua and Barbuda in terms of lowering the cost of travel to the destination and increasing arrivals out of the UK.”

Sourced from Travel Weekly

APD criticisms persist despite reform

APD criticisms persist despite reformBy Phil Davies,

There have been calls for further changes to APD after the Chancellor George Osborne announced a reform of the tax that will cost the government £985 million over four years.

IAG, the parent of British Airways and Iberia, dismissed the surprise announcement that two of the four bands would be scrapped as ‘window dressing’.

It continued to assert that the tax is damaging to the UK economy and jobs and should be scrapped entirely.

“It still punishes families and costs UK jobs,” the airline said in a statement. “The only long-term solution is to scrap APD in its entirety and allow the aviation and tourism industries to flourish, to the benefit of the wider UK economy.”

The Fair Tax on Flying lobby group welcomed yesterday’s decision but said it wanted to see further future reforms.

A spokesman said: “A Fair Tax on Flying welcomes the government’s reforms to Air Passenger Duty (APD) in this Budget which will see a saving to passengers and businesses travelling long-haul of over £200m annually.

“It is a recognition that for far too long, travellers have been suffering as a result of the excessive levels of APD.”

“The new banding system will help exporters including outbound tourism, it will encourage inbound tourism from long-haul destinations such as India and China and it will remove some of the distortions associated with the current system hurting holidaymakers – such as the premium passengers pay to travel to the Caribbean.”

“Today’s decision is therefore a positive first step. Hopefully the reforms announced today will have such a positive impact that they will encourage the government to undertake further reforms of APD in future.”

The decision to increase Air Passenger Duty in line with inflation will still hamper growth, the boss of travel technology firm Multicom warned.

Managing director John Howell welcomed the decision to reform all long-haul flights so they carry the same lower band B rate that passengers currently pay to fly to the US from next year.

But he described the overall inflation linked rise from April as “bewildering and out of touch” at a time when other countries in Europe are scrapping the tax.

Ireland will drop its equivalent air tax on April 1, leaving the UK as one of only five countries in Europe to levy a departure tax on flights.

Howell said: “The decision to reform long-haul flights banding is a small step in the right direction, but as is so often the case the good news is merely designed to bury the bad news.

“At a time when other countries recognise a tax on flights is counter-productive to economic growth, George Osborne continues to ignore calls to review the UK’s position and instead further increases it.

“This is a bewildering decision that once again demonstrates this government is out of touch when it comes to the impact of APD.

“Further increasing APD will hamper growth and damage both inbound and outbound tourism, thereby putting the UK at a disadvantage to its competitors.

“Despite the evidence that shows that scrapping APD would deliver growth, create 60,000 jobs and pay for itself through increased tax receipts on other goods and services, the Chancellor ignores it and instead increases the burden.”

Thomas Windmuller, senior vice president for airport passenger cargo and security at Iata, told The Telegraph: “APD remains an ugly beast that is a menace to the UK’s competitiveness. It needs a drastic haircut, not a trim to its outer extremities.”

Sourced by Travel Weekly

What they said: How the travel industry reacted to the Budget and the change to APD

George Osborne leaves to deliver the 2014 Budget

The chancellor’s decision to spring a major surprise and partially reform Air Passenger Duty has largely been welcomed by the trade.

From April 1 2015, bands C and D will be abolished moving the likes of the Caribbean, South Africa and Australia onto a level playing field with the USA.

Below are a selection of comments from the industry.

Campaign group A Fair Tax on Flying

“A Fair Tax on Flying welcomes the government’s reforms to Air Passenger Duty (APD) in this Budget which will see a saving to passengers and businesses travelling long-haul of over £200m annually. It is a recognition that for far too long, travellers have been suffering as a result of the excessive levels of APD.”

Richard Sealy, Barbados’s minister of tourism and international transport

“Over more than four visits I undertook to UK in order to hold meetings with key government and travel figures I was struck by how forcefully the travel industry came together on this issue. Our key travel industry partners were incredibly supportive in arguing with Barbados against the APD whilst still continuing to advocate travel to our country.”

Beverly Nicholson-Doty, chairman of the Caribbean Tourism Organisation

“This is a complete victory for the Caribbean, which, led by the CTO, has been lobbying against the unfair system which charged a higher rate of APD on flights to Barbados than Hawaii and placed the United States at a competitive advantage. We are delighted that the Chancellor has finally accepted the Caribbean’s proposal made in November 2010 to return to the simpler and fairer two band system.”

Amanda Wills, managing director of Virgin Holidays

“This is a very welcome announcement, and a real victory for the Caribbean and UK travel industry communities. The long haul market has taken enough of a battering because of the tough economic headwinds in recent years and the threatened increase in APD was the last thing it needed.”

Mark Tanzer, chief executive of Abta

“ABTA strongly welcomes the Chancellor’s announced cut to Air Passenger Duty and changes to the banding system as a first step in the reform of this damaging tax. Moving all long-haul flights into band B of APD at current levels will save passengers over £200m annually, and should boost travel and tourism as well as promote greater UK connectivity.

Peter Long, chief executive of Tui Travel

“We welcome today’s announcement by the Chancellor that APD bands C & D will be abolished from April 2015. We recognise the importance of this change and the difference that it will make to hardworking families in the UK, along with the tourism destinations worldwide that will benefit from reduced Air Passenger Duty rates.”

Jimmy Martin, president of the SPAA

“It’s a welcome first step, and a sign that the Government can listen when it’s motivated – or feels pressured – to do so. We hope it will be followed – before the next election – by a significant reduction in the high levels of APD currently levied on every UK air traveller.”

Darren Caplan, chief executive of the Airport Operators Association

“It is clear the Government has recognised that Air Passenger Duty represents a growing barrier to growth and investment, putting the UK at a competitive disadvantage compared to our nearest international rivals. The treasury, in this Budget, has acknowledged that high levels of long-haul APD compromise our ability to provide the connectivity to both existing and emerging markets that we will need if we are to win in the global race.”

Simon Buck, chief Executive of the British Air Transport Association

“We hope this positive first step recognising the damage caused by this tax will lead to the Government undertaking further reforms of APD in future, such as on the double tax hit on domestic flights.”

Paul Wait, chief executive of the GTMC

“The GTMC in its submissions to the Treasury and dealings with MPs has been calling for the simplification of APD bands to remove the most damaging aspects of this tax and facilitate an expansion of trade with key growth markets. Without this reform APD directly contradicts the rest of UK government policy by taxing new emerging markets the most.”

Dale Keller, chief executive of the Board of Airline Representatives

“The government has finally acknowledged what the industry and business knew all along – that the highest rates of aviation tax in the world were a brake on driving the UK’s economic growth with emerging markets.”

Virgin Atlantic

“A two band APD rate is a very welcome simplification to remove some of the biggest distortions of the current system, which the Chancellor himself admitted is crazy and unjust. The Government has rightly recognised the damage APD is having on exporters and the travelling public alike.”

Sourced by TTG Digital

WTTC accuses UK government of inhibiting tourism

WTTC accuses UK government of inhibiting tourismBy Phil Davies
Government policies are inhibiting the UK’s competitive position, the World Travel & Tourism Council warns on the eve of today’s Budget.The UK is “squeezing the economic opportunity” presented by travel and tourism and needs to “significantly change” its approach and policies.

The WTTC wants to see a freeze in the rate of Air Passenger Duty and the UK to align its procedures with the Schengen visa area to simplify access for inbound travellers.

The direct contribution to GDP from travel and tourism will slow this year to 2.5% after having grown by 3.4% in 2013, the organisation warns in its 2014 Economic Impact Report for the UK, published today (Wednesday).

The research shows that the sector directly contributed 3.5% to the UK economy last year and made up 10.5% of the economy when its wider supply chain benefits are included.

Travel and tourism contributed $7 trillion to the global economy – supporting 266 million jobs – and is expected to grow by 4.2% in 2014.

WTTC president and chief executive David Scowsill (pictured) said: “The UK is not taking the potential of travel and tourism seriously enough and is losing out on vital income and potentially hundreds of thousands of jobs at a time when creating employment opportunities for young people is vital.

“A composite of issues are contributing to a quelling of demand: Air Passenger Duty is the highest air tax in the world; the government has ruled out a lower VAT rate for hotels and restaurants; a lack of long-term planning in airport infrastructure; and restrictive visa policies.

“This means the UK is losing out on potential visitors to some of its European competitors, who are implementing more forward-thinking policies.”

He added: “Travel and tourism forecasts over the next ten years also look extremely favourable, with predicted growth rates of over 4% annually that continue to be higher than growth rates in other industries.

“Capitalising on the opportunities for this travel and tourism growth will, of course, require destinations and regional authorities, particularly those in emerging markets, to create favourable business climates for investment in the infrastructure and human resource support necessary to facilitate a successful and sustainable tourism industry.

“At the national level, governments can also do much to implement more open visa regimes and to employ intelligent rather than punitive taxation policies. If the right steps are taken, travel and tourism can be a true force for good.”

Sourced from Travel Weekly


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