Any cut in air passenger duty ‘not value for money’

SLASHING a contentious air tax does not represent value for money for Northern Ireland, a new study has found.

The report, for the Department for the Economy, said reducing air passenger duty (APD) could assist in the development of new routes but added that it would be expensive.

APD — a levy imposed on air travellers that varies depending on destination and class of travel — doesn’t apply on long haul flights from Northern Ireland.

The chief executives of Belfast International, Belfast City and the City of Derry Airports have, however, lobbied for it also to be abolished on short haul flights.

A “technical working group” has been tasked to examine a prospective cut in APD as part of the DUP’s confidence and supply pact with the Conservatives.

Ryanair previously said APD was one reason behind its decision to reduce flights from Belfast International Airport.

The report by Oxford Economics found that an extension of the APD cut would “likely be relatively effective as a means of increasing Northern Ireland’s aviation connectivity”.

But it added that the policy is “unlikely to deliver value for money” as Northern Ireland’s block grant would be cut to reflect the reduced revenue going to the Treasury.

It said it would also amount to an implicit subsidy to “a large number of already commercially-viable routes”.

The report focused on how to develop new air routes to economically important destinations like the United States, Germany and the Gulf states. It said the most realistic policy would be to invest more in “co-operative marketing agreements”, meaning economic development and tourism agencies, airlines and airports jointly spending money to promote and market new routes.

The report also recommended that the zero APD rate on long haul flights be maintained as it “is likely to be an important component of securing the long-haul priority routes”.

Although the zero rate was largely aimed at supporting a direct service between Belfast and New York it didn’t secure that route, with United Airlines ending its service in 2017 and Norwegian pulling out in 2018.

The report concluded that a “latent commercially viable market for a transatlantic route from Northern Ireland exists”.