Bitter airline rivals fly the same flag to fight tax rise

The Independent says that airlines expect a 25% increase in Air Passenger Duty, when the Chancellor makes his autumn budget statement at the end of November. In the last budget the rate of APD stayed the same, but with the proviso it would rise by above inflation in 2012. Long-haul passengers face far greater rises. The tax take is necessary for the UK economy, as aviation pays no VAT and no fuel duty.

 

17.11.2011 (Independent)

Osborne’s plan to raise air passenger duty faces an unusually united front of opposition

In a temporary truce of the kind last seen on the First World War battlefields at Christmas 1914, the bosses of Britain’s – and Ireland’s – biggest airlines will today suspend hostilities as they form an unholy alliance against the Chancellor. At a press conference at the already besieged London Stock Exchange, the leaders of British Airways, Virgin Atlantic, easyJet and Ryanair will share a platform to lambast George Osborne’s plans to raise air passenger duty.

The chief executives between them represent close to 200 million passengers a year. Michael O’Leary, the controversial boss of Ryanair, is normally never happier than when pouring scorn upon his opposite number at easyJet, Carolyn McCall. But they will put their differences aside to oppose an expected increase of up to 25 per cent in the tax levied on domestic and European flights.

In the last Budget, the tax remained unchanged, but with the proviso that there would be an above-inflation increase next year. The Government has hinted the tax will rise from £12 to £16, adding £32 to the price of a holiday for a family of four.[ APD is only charged on flights from, not to, UK airports. So the tax is £16 for a family of four, not £32. If the flights were domestic, within the UK, the charge would be £32]. Mr O’Leary and Ms McCall will say a tax rise will hit the UK regions particularly hard, as routes from airports outside London are often only marginally profitable and some could be axed as a consequence.

Long-haul passengers face far greater rises. At present, air passenger duty beyond Europe ranges from £60 for economy-class passengers to Egypt or Dubai, to £170 for business-class trips to destinations such as Singapore and Buenos Aires. While Steve Ridgway of Virgin Atlantic is normally to be found lambasting British Airways for what he sees as BA’s entrenched unfair advantages, he will forge a short-term ceasefire with his nemesis, Willie Walsh – now chief executive of IAG, comprising BA and Iberia. They will argue that aviation is crucial to an island nation such as Britain, and point out that London is the airline capital of the world. They will say passengers already pay the highest air taxes in the world and that rises will deter tourists and business travellers from coming to the UK.

Coincidentally, the press conference will take place next to the Occupy London encampment in the precincts of St Paul’s Cathedral. There are similarities: while the four airline chiefs will make plenty of noise and, no doubt, attract much attention, it is unlikely that their protests will have much effect.

There are likely to be some reforms of anomalies in the “banding” structure, which sees travellers to Barbados paying more than passengers going to Hawaii, nearly twice as far away. This is a consequence of basing the bands on the distance of the capital city from London.

The Government concedes this is a revenue-raising exercise, rather than a “green” tax, though executive jets will be included for the first time, which is expected to reduce slightly the number of business jets. But the Government’s main intention is to plug the deficit, and ministers are unlikely to be moved by today’s demonstration of solidarity between bitter rivals.

http://www.independent.co.uk/travel/news-and-advice/bitter-airline-rivals-fly-the-same-flag-to-fight-tax-rise-6263402.html

 

and

 

Treasury Tight Lipped on Airline Bosses’ Calls to Scrap Air Passenger Duty Tax

17.11.2011  (Interntional Business Times)

November 17, 2011 1:44 PM GMT

The Treasury is refusing to give a direct response to a plea by four airline chiefs to scrap the Air Passenger Duty (APD) air departure tax, in order to help the British economy.

In an open letter, the bosses say that the damage done by the tax far outweighs the revenues it creates. 

A Treasury spokesperson would only give the department’s position on APD.

“The Government took action by freezing APD this year,” said Robbie Browse, press office manager at the Treasury.  

“We consulted on a range of reforms to APD, including simplifying the tax and making it fairer by extending APD to private jets. We will say more on this in the coming weeks.

“It is also important to remember that the UK is not the only country with an passenger duty, and unlike many other countries the UK does not levy VAT on flights.”

Passenger numbers have fallen for three consecutive years – by 7.4million – while European airport passengers have boomed, increasing by 66.3million.

Holland’s abandonment of air tax for passengers, as its damage to the Dutch economy was four times that of the cash it raised, is highlighted by the letter as an example of why the duty should be scrapped.

Ryanair’s charismatic boss Michael O’Leary, IAG CEO Willie Walsh, Easyjet’s chief Carolyn McCall, and Virgin Atlantic’s head Steve Ridgway all signed the letter.

As APD was doubled in 2007 and raised year on year, the UK now has the highest air taxes for passengers in the world, they claim.

“For hard-working families, APD is a tax too far for the privilege of taking a well-earned holiday. It is also a tax on tourism and a tax on business,” read the letter.

“Aviation doesn’t just drive exports – it is a major exporter in its own right with our airlines earning nearly £11 billion of foreign revenues every year. Tourism is one of the UK’s most important earners and is worth £115 billion to the UK economy.

“We take our responsibility to the environment very seriously and have taken steps to reduce our impact. We support an emissions trading scheme (ETS) in principle but a combination of both APD and ETS when it is introduced is unsustainable.”

Willie Walsh told the BBC that APD “has to be axed for the benefit of families in the UK, jobs in the UK and the economy in the UK”.

Walsh was asked why the airlines couldn’t just absorb the taxes, rather than pass them on to passengers.

“Airlines don’t make vast profits. The industry has collectively never returned its course of capital,” he replied.

 http://uk.ibtimes.com/articles/251344/20111117/treasury-tight-lipped-airline-bosses-calls-scrap.htm

 

Air Passenger Duty – info from HM Treasury

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_InfoGuides&id=HMCE_CL_001170&propertyType=document

APD is an excise duty which is charged on the carriage, from a UK airport, of chargeable passengers on chargeable aircraft.  [Not charged on inbound flights].

Air Passenger Duty, from Wikipedia

http://en.wikipedia.org/wiki/Air_Passenger_Duty

Air Passenger Duty (APD) is an excise duty which is charged on the carriage of passengers flying from a United Kingdom airport on an aircraft that has an authorised take off weight of more than ten tonnes or more than twenty seats for passengers. The duty is not payable by inbound international passengers who are booked[1] to continue their journey (to an international destination) within 24 hours of their scheduled time of arrival in the UK. (The same exemption applies to booked onward domestic flights, but the time limits are shorter and more complex.) If a passenger “stops-over” for more than 24 hours (or the domestic limit, if applicable), duty is payable in full.

As part of the 2008 Pre-Budget Report, Air Passenger Duty was restructured.[2] These new charges take distance into account, making long distance flying significantly more expensive. Critics[3] of APD’s claimed environmental credentials point out that the tax takes no account of the efficiency of the aircraft. An airline using an old inefficient plane is treated equally to one using the latest most efficient engines. Charges initially rose on November 1, 2009 and then again on November 1, 2010. Before this, Air Passenger Duty was controversially[4] doubled[5] from February 1, 2007, and the lower rate was extended to all the countries within the Single European Sky. This table summarises the changes:

Old Rate Previous rate Feb 2007 – Oct 2009
European destinations, lowest class £5.00 £10.00
European destinations, other classes £10.00 £20.00
Other destinations, lowest class £20.00 £40.00
Other destinations, other classes £40.00 £80.00

Here, ‘European destinations’ includes countries in the European Economic Area and certain other European countries.

The distance used to calculate the new rate of APD is the distance between London and the capital city of the destination country as summarised below:

New Rate Nov 2009 – Oct 2010 (lowest) Nov 2010 onwards (lowest) Nov 2009 – Oct 2010 (other) Nov 2010 onwards (other)
Band A (0 – 2000 miles) £11.00 £12.00 £22.00 £24.00
Band B (2001 – 4000 miles) £45.00 £60.00 £90.00 £120.00
Band C (4001 – 6000 miles) £50.00 £75.00 £100.00 £150.00
Band D (over 6000 miles) £55.00 £85.00 £110.00 £170.00