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UK ‘missing out’ on new routes because of APD

Pile of money to represent compensation

A new study shows UK airports could be missing out on 66 new routes because of the current rate of Air Passenger Duty (APD).

The research – carried out by Frontier Economics – found 20 domestic connections, 31 short-haul flights and 15 long-haul destinations would be more financially viable for airlines if APD were abolished.

The report also found that a sample of eight routes were dropped by carriers in recent years on the basis that they were loss-making and would have been more viable without APD.

Industry association Airlines UK commissioned the research to show the impact of the departure tax on airline route economics and capacity decisions. The group concluded that the increase in ticket prices to cover APD ‘dampens demand’ and has a negative effect on UK connectivity.

Furthermore, the research revealed that the tax accounted for as much as 50 per cent of the price of an off-peak short-haul ticket from the UK to Poland and 44 per cent of an off-peak trip to Israel.

Airlines UK also said the £3.4 billion collected in APD every year is around the same cost as ‘aeronautical revenue’ (charges paid by airlines) generated by all airports in the UK.

The association claimed abolishing APD could open the door for airlines to establish domestic connections such as Bristol to Leeds Bradford, as well as long-haul flights from Bristol to Dubai and Edinburgh to Delhi.

In February, IAG CEO Willie Walsh claimed the rate of APD was preventing the group from establishing a base for its low-cost airline Level in the UK, saying hubs such as Birmingham, Cardiff, Edinburgh and Manchester were “not financially viable”.

Tim Alderslade, CEO of Airlines UK, commented: “As we prepare to leave the European Union, we should be doing everything in our power to create the conditions for economic success – and as an island nation it is hard to see how levying the highest rate of tax on air travel in the world is compatible with this goal.

“Airlines are in the business of responding to demand, and by increasing the price of a ticket by such an extent, the government is directly contributing to fewer connections at UK airports and lower frequency on existing services. The costs of such a counterproductive policy are there for all to see – with dozens of potential services, including long-haul connections outside of London, proving unviable under current conditions, putting a break on the UK’s economic growth.

“The message from this report is clear – get rid of this damaging tax once and for all and carriers will be in a position to respond in kind with more routes, greater frequency and better connectivity for the whole of the UK.”

Airlines UK has received support from government officials, with Priti Patel, MP for Witham, saying: “Britain’s high rates of APD act as a barrier to economic growth and this report shows how this tax is damaging our country. When we are competing in a global market for businesses, investors and tourists to come to Britain, this tax on travel put people off and is stopping business from creating jobs. This tax needs dealing with so we can open up more trade links and travel routes to the rest of the world and attract more businesses and tourists into Britain.”

Jim Shannon, MP for Strangford, added: “This is yet more compelling evidence that the current high level of UK APD is damaging the overall UK economy. We’re particularly hard hit in Northern Ireland, as we share a land border with a country with no equivalent aviation tax. Every extra route means more quality jobs and increased growth. Northern Ireland needs action on this tax, and so does the rest o the UK – action to boost jobs and trade. My colleagues and I will be pushing hard for this in the upcoming budget.”

Last year, the industry rallied together to petition for a cut to APD in the autumn budget, but chancellor Philip Hammond instead froze all short-haul and long-haul economy rates but increased those for premium economy, business and first class.

Government representatives have since hinted that a cut could be considered post-Brexit and the government opened a consultation on the tax in March.

With the autumn budget announcement due in November, groups such as Airlines UK, UKinbound and A Fair Tax on Flying are likely to step up campaigning for a cut in APD.

View the full APD report here

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