Air­lines hit out at in­creases in UK pas­sen­ger taxes

BA owner IAG says the move ‘un­der­mined Bri­tain’s global com­pet­i­tive­ness’

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY JOSH SPERO, FT TRANSPORTATION COR­RE­SPON­DENT

Air­lines have crit­i­cised in­creases in air pas­sen­ger taxes in the UK af­ter it was an­nounced in the Bud­get on Mon­day that the duty would rise in line with in­fla­tion from 2020

Air­lines have crit­i­cised in­creases in air pas­sen­ger taxes in the UK af­ter it was an­nounced in the Bud­get on Mon­day that the duty would rise in line with in­fla­tion from 2020.

IAG, which owns Bri­tish Air­ways, said it was “ironic” that the Bud­get “un­der­mined Bri­tain’s global com­pet­i­tive­ness” by rais­ing air­port pas­sen­ger duty (APD).

“Last year, Bri­tish Air­ways’ pas­sen­gers paid £682m in APD. We want to of­fer more flights to key trad­ing mar­kets, like our Eu­ro­pean com­peti­tors, but APD sti­fles route de­vel­op­ment to new emerg­ing mar­kets,” IAG said.

BA flies the busiest long-haul route in the world, be­tween London and

New York.

In the World Eco­nomic Fo­rum’s 2017 Travel and Tourism Com­pet­i­tive­ness Re­port, the UK came fifth over­all but 135th out of 136 for price com­pet­i­tive­ness, just ahead of Switzer­land.

The Board of Air­line Rep­re­sen­ta­tives in the UK, which has 70 mem­bers, said the in­crease was “be­yond the com­pre­hen­sion of air­lines as they seek clar­ity and con­fi­dence in the UK econ­omy”.

It added that Philip Ham­mond, the UK chan­cel­lor, should have pro­moted long-haul travel to new mar­kets ahead of Brexit.

Mr Ham­mond said on Mon­day:

“From April 2020 [air pas­sen­ger duty] will be in­dexed in line with in­fla­tion, but there will be no change in the duty rate for short-haul flights.”

APD, which is paid by each trav­eller fly­ing from UK air­ports to do­mes­tic and in­ter­na­tional des­ti­na­tions, in­creases by dis­tance and cabin class.

In 2017-18, the tax raised £3.4bn. It will now raise an ex­tra £800m be­tween 2020-21 and 2022-23, ac­cord­ing to re­vised fig­ures from the Of­fice for Bud­get Re­spon­si­bil­ity.

At the mo­ment, the rates in­clude £13 for short-haul econ­omy class, £156 for long­haul premium classes and £468 for long­haul pri­vate jet flights. It has been frozen for short-haul flights for eight years.

How­ever, the 2020 rise will be much lower than the 2019 rise the chan­cel­lor an­nounced in his Bud­get last year, when he said the long-haul rate for higher cabin classes would in­crease by £16 to £172 from April 2019 and for those trav­el­ling by pri­vate jet by £47 to £515 — a rise of about 10 per cent in each case.

Asked if the in­dus­try was over­re­act­ing, given the new changes were much smaller than last year’s, Vic­to­ria Ba­con, of the As­so­ci­a­tion of Bri­tish Travel Agents, said: “We re­acted badly last year and if there are in­creases an­nounced year on year in this way then that has a dam­ag­ing im­pact.”

There was some joy for the avi­a­tion sec­tor as Mr Ham­mond an­nounced epass­port gates, which al­low swifter pas­sage through air­ports, would be opened up to more coun­tries next year.

At the mo­ment, only pas­sen­gers from Eu­ro­pean Eco­nomic Area coun­tries — the EU plus Ice­land, Liecht­en­stein and Nor­way — and Switzer­land can use them, but Mr Ham­mond said trav­ellers from the US, Canada, Aus­tralia, New Zealand and Ja­pan would be able to as well.

John Hol­land-Kaye, chief ex­ec­u­tive of Heathrow air­port, wel­comed the move but said: “The gov­ern­ment should make this hap­pen be­fore the end of March 2019 to demon­strate that Bri­tain is open for busi­ness, as we leave the EU.”

Bri­tish Air­ways’ pas­sen­gers paid £682m in air pas­sen­ger duty last year, ac­cord­ing to the air­line’s owner IAG © Bloomberg

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