Chancellor says nothing on APD or travel in final Budget

18 March 2015 at 14.15 GMT
Chancellor George Osborne made no mention of Air Passenger Duty in today’s Budget, but Treasury Budget documents confirm APD will rise at the rate of the Retail Price Index (RPI) from April next year.

Changes to APD from this spring, already announced, will see the overall tax take from the duty fall by about £250 million in the next financial year.

But the Treasury still expects to extract £3.9 billion in annual duty from the tax by 2018-19, up from £3.2 billion in the current year.

APD will be charged at two rates rather than four from the start of April, with a short-haul economy rate of £13 and £71 for medium and long-haul flights.

Fares for children under 14 will no longer be subject to APD from May.

The Chancellor made few direct references to travel in his final Budget before the general election on May 7.

However, his pledge to “ensure Britain is the global centre for the sharing economy” could have repercussions for sections of the travel industry.

Budget documents state the Government’s intention to “enable government employees to use sharing economy solutions to book accommodation and transport when travelling on official business”.

Osborne promised “new investment in transport infrastructure for London”, “a comprehensive transport strategy for the North” and “over £7 billion of transport investment” for the South West.

A cut in corporation tax to 20% and review of business rates were calculated to please businesses.

The Chancellor appealed to households by announcing a freeze on fuel duty, a reduction in beer duty and a rise in the personal tax allowance.

Osborne announced a so-called Google Tax on companies seeking to avoid taxes by registering overseas would be introduced next week and apply from next month.

Raising APD by the RPI rate is likely to mean an above-inflation rise next year.

RPI has been consistently higher than the official Consumer Price Index (CPI) since 2009 and the former rate is no longer used by the Government as an official measure of inflation.

The annual RPI rate in January of this year was 0.5% against a CPI rate of 0.3%.

Sourced from Travel Weekly


Opinion: The country is united – all for one on APD

Opinion: The country is united – all for one on APDDevolving Air Passenger Duty to Scotland is fine if reductions in the tax are mirrored elsewhere, otherwise it’s unfair, says Tim Alderslade of the Airport Operators Association  and voters agree

With the general election less than three months away, the Airports Operators Association (AOA) has today published polling data from marginal seats on the issue of devolving Air Passenger Duty (APD) to Scotland.

This polling, conducted by ComRes, shows there is clear public support for matching any APD reduction north of the border with an immediate similar level of reduction everywhere in the UK.

Politicians seeking to respond to public opinion should take note.

As a sector, UK aviation welcomed the recent Government reforms of APD. Abolishing Bands C and D for the longest flights and axing APD on children under 16 by next year will undoubtedly deliver a much-needed boost to outbound and inbound tourism, and make the UK a more attractive destination for business travel.

Airports and airlines across the country will do everything they can to ensure passengers are aware of these changes, at home and overseas.

However, even with these reforms the UK still levies far and away the highest rates of APD in the world – double those of its nearest challenger, Germany, and the APD take is scheduled to increase in future years.

The Government itself estimates that by 2017-18 total revenues will reach an eye-watering £3.8 billion. To put this into context, in 2006-07 APD raised less than £1 billion for the Treasury.

The AOA and A Fair Tax on Flying, the industry coalition we campaign with on APD, believe a fundamental change in thinking is needed.

The fact that such a change is set to take place in Scotland, care of the Smith Commission’s proposal to devolve responsibility for APD to the Scottish Government, shows just what is possible.

The Commission’s recommendation – accepted by all the main UK political parties – would result in APD rates north of the border coming down by 50%, with the intention to abolish APD altogether eventually.

Draft legislation granting the necessary powers has been published and is due to be taken through the House of Commons by the next UK Government, to become law by next year.

Today’s polling data, reported in Travel Weekly, shows the aviation sector has the UK public on its side when it says all parts of the UK should benefit from the same cut in APD which Scotland is due to get.

The vast majority of voters polled in marginal constituencies – where the general election will be decided – believe APD rates should be consistent across the UK (78%), and more than half strongly agree with this statement.

A similar proportion agreed that if passengers in Scotland were to pay a lower rate of APD, this would be unfair to passengers in the rest of the UK (75%).

Around two thirds of voters of all main parties think the UK Government should commit to match a reduction in APD should the Scottish Government halve current rates (68%), with 40% strongly agreeing.

Airports and airlines need to be able to plan for the future with certainty. The former develop infrastructure for future passenger numbers years in advance. The latter set out their route schedules many months in advance.

The UK Government and politicians of all political hues should take heed of these polling results.

The results mirror growing concerns that allowing one part of the UK to levy substantially reduced rates of APD would not only be unfair to our sector and to passengers, but could also distort the market in terms of where airlines decide to fly to and from.

All those in the aviation and tourism sector should call for the main political parties to set out their thinking ahead of the UK general election, and to publish plans on how they intend to ensure no airport or passenger is disadvantaged by the devolution of APD.

With public opinion clearly supporting the idea that an APD cut in Scotland should be matched immediately by a cut everywhere in the UK and with a general election due now is the time press the case.

Sourced from Travel Weekly

Record inbound tourism figures welcomed by industry leaders

Record inbound tourism figures welcomed by industry leadersTrade body UKinbound welcomed record UK tourism figures confirmed yesterday but reiterated calls for action on “crippling” Air Passenger Duty and high visa costs.

Official figures showed that foreign traveller numbers to the UK rose by 6% to 34.8 million last year over 2013 with spending up by 3% to £21.7 billion.

Arrivals from the US, the most valuable source market, were up by 4% to 3.7 million – the best level since before the recession in 2008.

The figures indicate that numbers are on par with prime minister David Cameron’s forecast of welcoming 40 million visitors per year by 2020, but that they are likely to supersede this projection by 2017 if the 6% annual growth rate can be maintained.

But UKinbound said: “Without limitations such as the crippling APD and high visa costs, it is even likely that by 2020, visitor numbers could almost double, cementing Britain as a market leader.”

UKinbound CEO Deirdre Wells said: “The UK inbound tourism industry has made momentous progress this year, which has exceeded all our expectations.

“What is needed at this stage is continued support to maintain momentum – by increasing the competitiveness of the UK’s taxation and visa system, we could see these record breaking figures double by the end of the decade.”

VisitBritain chief executive Sally Balcombe said: “Inbound tourism is increasing year-after-year, with Britain now achieving its second consecutive annual record, with further growth forecast for 2015.

“The marketplace for global tourism is getting tougher, but the government’s GREAT campaign and VisitBritain’s successful global marketing activity has meant that tourism is increasingly becoming an essential part of the wider success of our economy.

“Such positive growth from North America is very encouraging and we will look to boost this further with our 2015 Countryside is GREAT campaign, sending all these valuable visitors across the nations and regions of Britain.”

Tourism minister for Tourism Helen Grant added: “I am delighted that tourists from overseas are coming to our country in record numbers, spending more and enjoying the very best of Britain.

“It confirms that our tourism strategy is working and highlights the important role the industry plays in the government’s long-term economic plan.

“I will continue to work hard with the sector to encourage tourists to visit all parts of the country to further boost local growth and jobs.”

Sourced from Travel Weekly

Record number of airline passengers in 2014

Record number of airline passengers in 2014Image via Shutterstock

Global airline passenger demand rose 5.9% last year with record carryings of 3.3 billion compared to 2013, latest Iata figures show.

The performance was above the 10-year average growth rate of 5.6% and the 5.2% growth seen in 2013.

Capacity rose 5.6% last year, with the result that load factor climbed 0.2 percentage points to 79.7%.

More than half of the growth in passenger travel occurred on airlines in emerging markets including Asia-Pacific and the Middle East.

A pick-up in Chinese domestic travel, which expanded by about 11% in 2014, helped drive the growth in recent months.

Iata director general and chief executive Tony Tyler said: “With a 5.9% expansion of demand, the industry out-performed the 10-year average growth rate.

“Carriers in the Middle East posted double-digit growth while results in Africa were barely above previous-year levels.

“Overall, a record 3.3 billion passengers boarded aircraft last year – some 170 million more than in 2013.”

But he added: “While it is clear that people will continue to travel in growing numbers, there have been signs in recent months that softening business confidence is translating into a levelling off of international travel demand.

“In the aftermath of the Greek elections and the intensifying debate on how to deliver a dynamic economic program for Europe, we must not forget the power of air connectivity to create growth.

“Governments can kick-start economic development by reducing the passenger taxes that depress demand for air transport, costing jobs and prosperity.

“There are some positive signs. The Scottish government is promising to cut its air passenger duty by 50%. And Austria’s air transport levy is being evaluated as part of comprehensive tax reforms. Scrapping the Austrian levy alone could create some 3,300 jobs.

“That should help convince politicians in these countries to move from considering reductions to delivering results.

High taxes, onerous regulation and infrastructure limitations make Europe a tough place to run an airline.

“A continent-wide commitment to address these issues so that aviation can play its critical role as an economic catalyst would be a powerful signal that Europe’s politicians really do mean business,” said Tyler.

Sourced from Travel Weekly

Flybe undecided on airport expansion options

Flybe undecided on airport expansion optionsThe importance of regional air links and the damaging impact of Air Passenger Duty have both been highlighted as key issues for consideration by the Airports Commission.

Flybe, in its submission to the commission which is considering three options for airport expansion in the southeast, says the decision about a new runway should be based primarily on strategic and economic ‘national’ considerations.

The regional carrier, which sold its Gatwick slots to easyJet and is facing increased competition on new routes from London City airport, says that there “does not appear to be any clear and verified ‘show-stoppers’ that would automatically rule out any of the short-listed schemes”.

The shortlisted options are a third runway at Heathrow, a runway extension at the west London hub and a second runway at Gatwick.

The airline says it unable to express a clear preference publicly as much depends on the commercial terms offered “and we have not yet had sufficient clarity on these”.

However, Flybe confirms that it would be interested in re-building operations from Gatwick if a new runway is given the green light, subject to a sufficient number of affordable slots being made available for regional airlines at attractive times of the day.

Flybe’s evidence – seen by Travel Weekly – describes the weakest areas of the commission’s work to-date as including:

  • Clarity regarding regional access to new slots coming out of new runway infrastructure.
  • Extraction of binding commitments over such slots.
  • Its decision to “shy away” from any engagement over the “crucial issue” of the form and structure of APD.

Flybe points out work it has carried out demonstrates how changes to the scale of APD and the way in which it is raised “could materially improve the value of a new runway to the UK’s regions, and our millions of regional customers”.

The airline adds: “Our overriding view remains that in the absence of a thorough analysis on APD the commission is not fully factoring in the potential benefits from guaranteed and affordable regional connectivity at a new or enhanced national hub.”

Flybe also suggests the use of RAF Northolt, to the north of Heathrow, as a potential location for regional air services.

The military airfield, which is also used by private business aircraft, could “single-handedly deliver some beneficial outcomes” while new runway capacity is being built.

“We refer to the temporary or permanent use of RAF Northolt for regional air services,” Flybe says, suggesting this option has been overlooked by the commission.

“We believe this facility, which is owned and operated by the government, offers significant potential and we would be very keen to explore with the commission and/or government what might be done to realise that potential quickly and cost effectively.

“We know there is enormous appetite for such a solution amongst many of the regions we serve.”

Sourced from Travel Weekly

English airports cry foul over Scottish air tax competition

The UK government’s decision to devolve control of Air Passenger Duty (APD) to Holyrood means that a family of four could eventually be saving as much as £388 for a one-way journey to long-haul destinations.

But airports in the north of England last week cried foul claiming that passengers will use Scottish airports to avoid paying the tax and that thousands of jobs at regional airports are now at risk.

The promise to hand the Scottish Government control of APD is part of the UK government’s devolution package for Scotland following the Smith Commission recommendations. The Scottish Government last week said it would halve the rate within the next Parliament and abolish completely “when the public finances allow”.

But airports as well as tourism bodies south of the border are up in arms, fearing that it will create an uneven playing field for the aviation sector as passengers in the catchment areas of airports such as Newcastle, Manchester and Liverpool will simply drive across the border to rival airports in Scotland to avoid potentially huge APD costs.

Newcastle airport – the closest international airport to Scotland – calculates that the abolition of APD in Scotland could cost the north-east of England 1,000 jobs and £400 million gross value added within a decade. The airport also believes that it could lose around 10 per cent or passenger traffic, amounting to 400,000 passengers a year.

Newcastle airport’s planning director Graeme Mason told the Sunday Herald that Scotland cutting or scrapping the passenger levy would create an unfair “cross-border market distortion” that would fester unless the UK government matches any reduction in APD south of the border.

But Chancellor George Osborne has so far dismissed the calls for the tax to be abolished in England and Wales, although he recently hinted that airports in the north of the country could be given help with marketing.

When Osborne appeared before a Treasury select committee earlier this month he admitted that the concerns of airports in northern England were “perfectly legitimate” and that the Treasury’s own figures showed that Manchester – the UK’s third largest airport – could lose as much as 3 per cent of its traffic, which amounts to 600,000 passengers a year.

Of course it is unlikely that a passenger in the north of England would go to the trouble of travelling to a Scottish airport rather than one closer to home to save £13 in APD on a return short-haul trip, but anyone travelling long-haul could potentially save themselves hundreds of pounds. The saving could be enough, for example, to undermine direct flights between Newcastle and New York that are set to launch in the May.

But in Scotland, the decision to devolve APD to Holyrood has been greeted with delight by airports, the tourist industry and businesses which have campaigned both before and since the independence referendum to get rid of the tax.

And many of those behind the campaign say that airports in England will eventually benefit from the abolition of the tax in Scotland, as this increases pressure on the UK government to follow suit and create a level playing field across the country.

Describing the move as a “huge step in the right direction” Gordon Dewar, the chief executive of Edinburgh airport, said that an extra one million passengers a year will travel through Scottish airports, the national economy will get a massive boost, jobs will be created and up to 30 new routes could be launched.

He hopes the 50 per cent cut in APD will be implemented by the Scottish Government as soon as possible as airlines are already beginning to plan their schedules for summer 2016. Airlines mulling whether to launch new routes between tourist draws such as Copenhagen or Barcelona might just be tempted to open new routes to Scotland instead once they see that APD is on the way out.

But Dewar played down the possibility that thousands of passengers will stop using airports in the north of England to take advantage of lower APD in Scotland. “I understand that fear but we think that only modest numbers of people will do that. The important thing is that we demonstrate the value of having no APD.”

Dewar stressed that Scottish airports are not seeking a competitive advantage over English airports. The hope is that Scotland’s experience will act as a beacon and eventually lead to the tax being dismantled south of the border, he said.

Exactly such a scenario was played out in the Netherlands. After introducing a form of APD in 2008 the Dutch government scrapped the tax within a year after Dutch residents started travelling in their droves to airports in neighbouring Germany to avoid the tax. Belgium, Denmark, Malta and Norway have also scrapped flight taxes for similar reasons.

That leaves the UK as one of only five countries in Europe to levy a passenger departure tax (the others being Austria, France, Germany and Italy) but the UK tax is, on average, five times higher than those other countries and is thought to be the highest in the world (see separate panel).

The London-based lobby group “A Fair Tax on Flying”, a coalition of airports, airlines, travel and tourism firms, said it expected that a similar domino effect would happen in England and Wales once APD is phased out in Scotland.

There have already been calls from politicians in Wales to wrest control of APD. With the increasing likelihood of differing forms of the tax being established in different regions of the UK, it was possible that “market distortions” would damage the aviation sector in the UK for some time to come.

A spokesman for the group said: “We believe that it is essential a cut in APD anywhere should be matched, as soon as possible, across the whole of the UK so that the benefits are shared by all, and no part of the country is disadvantaged in any way.”

Amanda McMillan, the managing director of Glasgow airport – and since December the chief executive of the new AGS Airports Limited, the Spanish-Australian partnership established to invest in Aberdeen, Glasgow and Southampton airports – also believes that a dismantling of the tax in Scotland could hasten the end of APD south of the border.

“Scottish airports do not compete substantially with airports in the north of England for flights. Our most energetic competition is in Europe where there is no tax at all,” she said.

Stephen Leckie, chairman of the Scottish Tourism Alliance, said that anything that makes Scotland more accessible for potential tourists – in particular though lower fares and the launch of new air international air routes – will be warmly welcomed by the tourist industry of a country in a relatively remote corner of north-west Europe to which most tourists travel by plane.

The City of Glasgow, meanwhile, hoeps that seeing the back of APD will provide a significant boost to its valuable conference trade. The city’s marketing bureau calculates that Glasgow has over recent years lost £25 million in conference business with organisers opting for cities which are cheaper to fly to. The leader of Glasgow City Council Gordon Matheson said that slashing APD will “help Glasgow compete on a level playing field with other international cities”.

In 2011 the UK government was forced to slash APD on long-haul flights in Northern Ireland, to stem the flow of passengers travelling south to Dublin to take advantage of the Republic of Ireland’s low and now abolished tax on flights. In 2013 this led to the Northern Ireland Assembly winning control of APD on long-haul flights from the province from Westminster.

Previously, Continental Airlines had only agreed to continue its flights between Belfast and Newark if APD was reduced.

Kevin Thom of the Scottish Passenger Agents’ Association said he has “no sympathy at all” with airports in northern England if they lose passengers because of a reduction in APD in Scotland.

For decades passengers in Scotland have travelled to airports in northern England to take advantage of cheaper flights which the larger English airports could offer because of greater competition on routes to popular destinations and because of the reduced flying time on many routes. Now they might start to do the opposite, and the extra business would be welcome by all involved in the travel trade in Scotland.

When APD was introduced by Chancellor Kenneth Clarke in 1994 he justified the tax as a green measure that would contribute to a reduction in greenhouse gas emissions from aircraft, but critics claim that the tax takes no account of the efficiency of aircraft, with old fuel-guzzling planes being treated equally to the aircraft with the latest most efficient engines.

Thom believes that the high level of APD in the UK, allied with the fact that most European countries either have much lower flight taxes or none at all, has become detrimental to the environment as it encourages travellers to use make longer journeys involving more flying time. For example, transatlantic flights via non-UK hub airports such as Amsterdam or Frankfurt rather than London.

Successive UK governments have become increasingly addicted to the tax because the £3 billion annual APD revenues have never been ring-fenced to promote green transport.

Many are hoping that APD could be reduced by the Scottish Government by the end of the year, although some industry insiders say that the first quarter of next year is more likely as the next Scotland Bill will not complete its Parliamentary stages after the General Election in May. Once the bill is given assent, the Scottish Parliament will then have to lay down its own legislation to enact a reduction in APD from a date to be specified.

Over the last couple of decades many European countries, under pressure to be seen to be helping the environment, have experimented with some form of passenger departure tax. But in at least half of those countries the tax was withdrawn when governments realised that passengers were voting with their feet and travelling from countries where such taxes had been abolished or reduced.

A similar inexorable unravelling of the tax now seems to be underway within the UK and it is unlikely that businesses in England and Wales will continue to tolerate paying a tax that has been drastically cut in Northern Ireland and will now be devolved to Scotland.

Whose idea was it anyway?

Air Passenger Duty (APD) was introduced by John Major’s UK Conservative government in 1994.

It was originally payable at just £5 for one-way domestic and European flights and £10 elsewhere but it has become a nice little earner for successive governments who have steadily increased the levy to the point that it is now the highest tax of its kind anywhere in the world.

Long-haul flights in the cheapest economy class are now charged between £67 and £94 per flight, depending on the distance travelled. Other classes of travel, including so-called premium economy class, are charged between £138 and £194 per long-haul flight while anyone travelling in a small plane is charged between £276 and £388 per flight.

The charge now brings in £3 billion a year into Treasury coffers of which £200 million is paid by passengers starting their journeys in Scotland.

A study published by PricewaterhouseCoopers in 2013 on “The Economic Impact of APD” concluded that the UK economy would be boosted by £16bn within three years of being abolished and that around 60,000 jobs would be created within seven years. The report also concluded that lost Treasury revenue would be offset by increased receipts from other taxes.

Last year Chancellor George Osborne announced that the tax’s two highest long-haul tax bands will be abolished from April 2015. He also said that APD on economy flights for children under 12 will no longer be charged from May 2015 and for under-16s from March 2016.

Sourced by Herald Scotland

Airline body to demand APD’s ‘final destination’ – abolition

By Phil Davies,

A “new and unique” opportunity has emerged to secure the  abolition of Air Passenger Duty, industry leaders and politicians will hear tonight (Wednesday).

Growing public and political concern over the air tax, combined with forthcoming devolution of powers over APD to Scotland, means it should be abolished across the UK during the next Parliament.

The message will come at the annual dinner of the British Air Transport Association in London.

With keynote speaker and former Scottish first minister Alex Salmond MSP in attendance, the airline trade body will welcome the Scottish government’s commitment to act on APD when it receives the necessary powers.

The abolition of APD will be one of five policy proposals contained in a new Bata manifesto to be published in March.

The manifesto will set out the economic and social benefits generated by UK airlines and will propose five policy areas where government action would enable the sector to deliver even more in the next Parliament.

Recent reforms that abolish the two highest long-haul bands and exempt children from paying APD are “positive steps in right direction”, but Bata will tonight call for the final destination to be abolition.

Chief executive Nathan Stower will say: “The UK still has the highest tax on flying in the world by some margin. The next government should finish the job, put this damaging tax on trade, tourism, families and businesses out of its misery, and abolish APD in the next Parliament.”

Citing Northern Ireland and Holland as examples, Bata will highlight how passengers are prepared to travel across borders to take advantage of differences in flight taxes.

The UK government was forced to significantly reduce APD on long-haul flights in Northern Ireland during this Parliament, followed swiftly by full devolution, to stem the flow of passengers travelling south to Dublin to take advantage of Ireland’s nominal equivalent tax.

The UK and Scottish governments will be urged to learn from the Northern Ireland experience.

Stower will say: “Bata members respect the decision to devolve APD to Scotland and agree that the tax is damaging to families and businesses in Scotland, as it is in the rest of the UK.

“We welcome the Scottish government’s commitment to halving APD with a view to abolition, but urge that full abolition be achieved by both the Scottish and UK governments in the next Parliament to prevent unfairness for passengers across the UK and to avoid market distortions.”

Supporting the campaign, easyJet CEO Carolyn McCall said: “APD is tax on passengers and has a proven, negative impact on UK tourism, investment and business activity. That is why we are working with other UK airlines to abolish the tax.

“Abolishing APD would boost the UK economy and pay for itself by increasing revenues from other sources. Research by PwC has revealed that the GDP boost to the UK economy would amount to at least £16 billion in the first three years and result in almost 60,000 extra jobs in the UK over the longer term.”

Sourced by Travel Weekly