Demand to reduce APD to improve domestic connectivity

Demand to reduce APD to improve domestic connectivityImage via Shutterstock

The government is being urged to reduce Air Passenger Duty to boost domestic air connectivity.

The call came from the British Air Transport Association as it emerged that Flybe’s Newquay to Gatwick route is to get £2.5 million of government funding to keep it running over four years.

The Department of Transport said it was now a “public service obligation”. About 100,000 passengers per year are expected to use the flights.

The route had been under threat last year when easyJet, which was expected to take over the Newquay-Gatwick slots from Flybe, said it was not planning to operate the route, blaming lack of demand, but Flybe continued the service.

Flybe has been working alongside Newquay airport, Cornwall Council and the local MPs to gain public service obligation funding for the route, which will operate up to three times a day.

BATA chief executive, Nathan Stower, said: “A few domestic routes are not sustainable without public support and I am pleased that the government recognises the importance of regional air connectivity.

“The government could support other domestic services by simply reducing Air Passenger Duty – the world’s highest tax on flying.

“At £26 for a return ticket on domestic flights, APD hits people flying within the UK for business and leisure particularly hard.

“It’s crazy that the Newquay-Gatwick service could raise up to £2.6 million in Air Passenger Duty in its first year alone – £100,000 more than the £2.5 million central government support provided over four years for this public service obligation route.”

Flybe chief executive, Saad Hammad, said: “The people of Cornwall need efficient and affordable air access to the capital, which is faster than road and rail.

“It is an important step in improving regional connectivity in the UK, which contributes significantly to economic development.

“Flybe’s strategic vision is to give regional customers around the country more convenient access to the wider world. We look forward to continuing to serve our passengers flying to and from Newquay.”

St Austell & Newquay MP, Stephen Gilbert, told the BBC: “This is the culmination of months of hard work to make the case that Cornwall does need a route into London.

“It is worth about £30 million a year to the Cornish economy with about 3,000 jobs directly dependent on that route.”

A Gatwick spokesman said: “We welcome news that this crucial route has been secured and look forward to supporting Flybe’s operation.

“Britain’s economy is driven by the four corners of the UK so we are delighted to offer the south-west a vital connection to London and other key international destinations.”

Sourced from Travel Weekly


Iata boss cites APD as worst example of excessive taxation

Iata boss cites APD as worst example of excessive taxationTaxation of European aviation is now around $40 billion a year, twice that of the Asia-Pacific region, according to Iata chief Tony Tyler.

In a speech to the European Regional Airlines Association general assembly in Barcleona, he described the UK’s Air Passenger Duty as “the most egregious example of excessive taxation”.

The Iata director general and chief executive warned that taxes in Germany, Austria and elsewhere continue to hold back air connectivity.

But new tax proposals keep emerging, with Portugal and Sweden suggesting new levies on passengers in the last two months alone.

“Despite this situation, I do see a glimmer of light at the end of the tunnel. Parts of Europe are slowly waking up to the economic consequences of disproportionate aviation taxation.” Tyler said.

The Irish government’s decision to scrap its passenger charge was “significant”.

Tyler said: “Aside from the benefit to the Irish economy itself, it also keeps the pressure on Northern Ireland to keep its low rates of APD.

“The Scottish government is likely to get further tax powers following the recent close independence referendum, and freedom to set a lower APD rate is one of their requests.

“Even the minor improvement that was announced to the APD banding earlier this year, dismal tinkering as it was, shows that the arguments are moving in our direction.

“So despite it sometimes feeling like we are banging our heads against a brick wall, I believe we are making some progress on this issue.”

But he urged the aviation industry “to keep arguing for a new mind-set from European leaders” to focus them on building a strong airline sector.

“If governments and industry work hand in hand to promote connectivity then the ability of aviation to act as an economic engine will be enhanced,” said Tyler.

“How can this be achieved? If you look across the world at the places where aviation is an undoubted success story, certain basic points are common. Governments encourage the development of world-class infrastructure and a regulatory and fiscal framework that facilitates, rather than frustrates, air connectivity.

“In Europe, by contrast, almost the opposite case holds. Infrastructure development moves at a snail’s pace: Eurocontrol estimates that there will be a shortfall of 12% – around 2 million flights – in airport capacity by 2030.

“Next year we will see a crucial decision on the future of runway capacity in the South of England.

“Germany has several airport issues, including the continuing problems in Berlin and the decision to prevent expansion at Munich.

“There are 93 slot-constrained airports in Europe, which speaks to the severity of the looming capacity crunch. And let’s remember that every flight which cannot happen because of limited capacity is full of lost economic opportunities.

“Finding a political and social consensus for the expansion of aviation is absolutely essential for our industry and the economic development of the world.”

Sourced from Travel Weekly


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


Follow

Get every new post delivered to your Inbox.

Join 2,527 other followers