Heathrow wants Chancellor to scrap APD on domestic flights – which would help make some routes viable

Heathrow is urging the Government to scrap Air Passenger Duty on domestic flights. It has written to the Chancellor, Philip Hammond, before the Budget on 22nd November, arguing for this.. Air Passenger Duty is £13 per person (aged over 18) per flight leaving a UK airport.  Therefore while a passenger on  a return flight to a European airport only pays £13, on a domestic return flight they pay £26.  Heathrow says if APD on domestic fights was scrapped, it would result in a £24m “annual saving” for those flying from that airport. [That means a £24 million loss to the Treasury].  Domestic air tickets tend already to be cheaper than rail for the same journey, and this would make them even cheaper.  Consultancy Frontier Economics reckons removing APD on domestic flights would increase GDP growth and boost tax receipts to offset the loss to the Treasury from the abolition of the tax. That would mean there would have to be a lot more domestic passengers. Heathrow has promised there will be more domestic links, if it gets a 3rd runway. Many of those would need to be subsidised. Removing APD could make these domestic links viable, without costing Heathrow anything.  That results in the taxpayer losing tax, and Heathrow saving itself money.
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Heathrow urges Chancellor to scrap air tax on domestic flights in Budget

By Bradley Gerrard  (Telegraph)
20 SEPTEMBER 2017

Heathrow is urging the Government to scrap a punitive travel tax on domestic flights to support economic growth as part of a nine-point Brexit plan.

The airport has written to the Chancellor Philip Hammond ahead of the Budget in November with a plea for air passenger duty (APD) to be removed on domestic routes, arguing that UK passengers pay an extra £225m each year compared to those in Europe.

The UK’s rate of APD is the highest in Europe and the second highest globally, behind only the central African country Chad.

Passengers on a return domestic flight from Heathrow pay £26 in APD. Scrapping the charge would result in a £24m annual saving just for those flying from that airport.

The airport said the tax acts as a brake on the number of domestic flights offered by airlines and that removing it would be a sensible move post-Brexit given that most European countries have little or no tax on internal flights to support their domestic industries.

Consultancy Frontier Economics reckons removing APD on domestic flights would increase GDP growth and boost tax receipts to offset the loss to the Treasury from the abolition of the tax.

In addition to the aviation industry, the Conservative Party’s partners in government, the DUP, support getting rid of ADP on overseas routes as well.

Research commissioned by Manchester Airports Group showed that in the past 12 years, UK APD to non-European destinations had grown by 265pc – from £20 to £73 per departing passenger – and that this had been a major factor in long-haul seat growth in the UK lagging behind rivals in Europe

Heathrow chief executive John Holland-Kaye said: “Abolishing air passenger duty on domestic flights is a bold move that would supercharge British competitiveness, make it cheaper for British businesses to get to London and beyond, and ensure every part of our country can prosper in the future.”

The DUP were told they would be given a report on “the impact of VAT and APD on tourism” in Northern Ireland in exchange for their comfort and support agreement with Theresa May’s government.

The comments came as the airport released its Bringing Britain Closer report, a nine-point strategy it believes offers “practical, deliverable and binding plans” to connect more of the UK to global growth and prepare the economy outside London for Brexit.

Heathrow has called on the Government to ring-fence a number of slots at the airport once it is expanded for domestic use but ministers can only do this once the UK leaves the EU because the bloc’s competition rules currently prohibit such a move.

Getting rid of APD has the support of some airlines, especially those with large domestic networks. Flybe chief executive Christine Ourmières-Widener claimed APD could account for as much as 50pc of a total ticket price on her airlines when based on its lowest fares.

http://www.telegraph.co.uk/business/2017/09/20/heathrow-urges-chancellor-scrap-air-tax-domestic-flights-budget/

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Heathrow urges chancellor to scrap air passenger duty

September 20 2017 (The Times)

Air taxes should be scrapped on UK domestic flights to stimulate growth, according to Heathrow.

Britain’s biggest airport said that passengers paid £225 million more in taxes on domestic flights compared with peers in other parts of Europe.

In a letter to the chancellor today, it calls for air passenger duty (APD) to be dropped on domestic flights to increase the number of routes.

Ministers have long insisted that Heathrow’s plans for a third runway will create more domestic routes, gaining support for the policy from Scottish and Northern Irish MPs.

The letter will be seen as a warning that expansion could be under threat unless APD, which adds £26 to the price of a domestic return flight, is scrapped. The intervention comes ahead of the budget on November 22.

https://www.thetimes.co.uk/edition/business/heathrow-urges-chancellor-to-scrap-air-passenger-duty-5pp6zbz5b

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See earlier:

Walsh says Heathrow charges rule out more UK domestic links, and he will not be told where to fly

Chris Grayling and the DfT were eager to point out how a 3rd Heathrow runway would increase links to the regions, and increase the number of routes from Heathrow from 8 now to 14 in future. And these links might have to be ensured by payments. Heathrow, in trying to persuade government this was possible, said it would create a new £10m Route Development Fund. The Airports Commission said there should be a Public Service Obligations on an airport-to-airport basis, to encourage these unprofitable routes. Now Willie Walsh has confirmed that there is “zero chance” of British Airways operating any new domestic flights from an expanded Heathrow.  He will not be told, by government or an airport, where to fly.  He says the high landing charges, inevitable to pay for the expansion, made it impossible to deliver an increase in domestic air links. He would refuse to run these links even if Holland-Kaye “begs me to do it” because it would not be profitable. He said Heathrow was “fat, dumb and happy” and that it attracted large numbers of airlines but that many failed to make a profit. He also said with a 3rd runway, Heathrow would price out most airlines. Holland-Kaye is hoping he can get easyJet, Flybe and BMI Regional to take on potential regional routes. Mr Walsh said the current charge of £40 for a return trip would double to £80 per passenger with a new runway.   

http://www.airportwatch.org.uk/2016/11/walsh-says-heathrow-charges-rule-out-more-uk-domestic-links-and-he-will-not-be-told-where-to-fly/

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Heathrow’s “manifesto” says:

“Heathrow already links eight cities to the world – Aberdeen, Belfast City, Edinburgh, Glasgow, Inverness, Leeds, Newcastle and Manchester. An expanded Heathrow would add flights to new domestic routes to Jersey, Isle of Man and Belfast International[These are the routes EasyJet suggested it might add, if it started operations at Heathrow, with a 3rd runway. See below]

“Heathrow will be establishing a special £10m Route Development Fund, providing start-up support for new domestic destinations. This will support up to five new routes from Heathrow with airports like Liverpool, Humberside and Newquay on the shortlist.”   [Newquay already has a PSO funded route to Gatwick. The Government’s Regional Air Connectivity Fund (RACF), is a £20 million fund set aside by the coalition Government, to pay for routes such as Newquay].

Heathrow also says:

“A third runway will lead to better connections from Wales to the rest of the globe – enhanced by the fast Western Rail Link that is backed by the Welsh Assembly.”   [Scarcely a direct consequence of a runway …. Cardiff is not on the list of airports mentioned above. AW note].

Heathrow actually says that much of the connection to the regions will be by better rail links, getting people to Heathrow. [ link  Page 12].    November 2016. Heathrow has now taken down that page.

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