Industry leaders slam new ‘ultra’ long-haul APD rate

Industry leaders slammed the increase in Air Passenger Duty (APD) on ‘ultra’ long-haul flights unveiled in the Chancellor’s Budget today while welcoming the halving of the APD rate on domestic flights.

Chancellor Rishi Sunak confirmed a 50% cut in APD on domestic flights together with a new ‘long distance’ rate on flights of more than 5,500 miles from April 2023.

Dale Keller, chief executive of the UK Board of Airline Representatives (BAR UK) denounced the long-haul increase as “political posturing” ahead of the COP26 summit.

Iata director general Willie Walsh also accused the Chancellor of “political hypocrisy” by announcing a “cash grab masquerading as a green tax the week before COP26”.

Walsh noted Iata member airlines recently committed to achieving net zero carbon emissions by 2050 and insisted: “A tax hike does not help. None of the billions of pounds collected will be directed to green investments.”

He also suggested the hike in APD “makes a mockery” of the government’s ambition to create a ‘Global Britain’, saying: “It is astounding that the UK Chancellor thinks now is the time to raise the cost of flying.”

Abta chief executive Mark Tanzer said: “Now is not the time to be announcing future tax rises on the sector.

“APD is not and has never been an environmental tax. The revenues are not used for environmental purposes and the tax does not encourage use of newer, cleaner aircraft.”

He argued: “We support the decision to remove double taxation on domestic APD, [but] it is regrettable that this cut will be partially offset with increased rates for long-haul flights.”

Gary Lewis, chief executive of The Travel Network Group, said reducing air passenger duty on domestic flights while increasing it on long haul flights “feels like a kick in the teeth for the international tourism industry” because domestic journeys “could be taken via other means”.

He said the government is “effectively putting more obstacles in place for people who are looking to resume overseas travel and support tourist destinations which are starting to open up after almost two years of closure”, adding: “Our industry will not recover until people are able to travel as freely and as confidently as they did before 2020.

“Between now and when that time comes, we urge the government to extend relief to the travel industry.”

Airlines UK chief executive Tim Alderslade said: “Reducing the rate of domestic APD will correct an anomaly that has existed for too long and greatly enhance connectivity between the regions of the UK.

“But we’re still the most taxed airline sector in the world and as we recover from the pandemic we’re being burdened with a new, uncompetitive ultra-long-haul APD hike.”

He said “not a penny” of APD “has ever been used for environmental purposes and increases will only hinder UK aviation’s ability to invest in decarbonisation.”

Clive Wratten, chief executive of the Business Travel Association (BTA), welcomed “the reassessment of domestic APD”, but warned: “The introduction of a new ultra long-haul classification will unfairly impact business travellers at a key point in the recovery of our economy.”

He pointed out business travellers “will be heavily taxed to go to crucial destinations such as Singapore, Hong Kong and Australia” and called on the government “to ring-fence at least 75% of APD for sustainable initiatives”.

Wratten insisted: “This must be about building a sustainable future not just grabbing taxes.”

Joanne Dooey, president of the Scottish Passenger Agents’ Association (SPAA), also welcomed the reduction in domestic APD but said: “The increase in long haul APD which will come into effect at the same time won’t help Scotland’s economic recovery.

“This planned increase is disappointing not only for the travel industry but for Scottish businesses.

“We hope the tax raised by this increase will be ring fenced to support developments in sustainable fuels and other measures to move towards net zero.”

Karen Dee, chief executive of the Airport Operators Association, said: “The correction to the long-standing taxation of APD for return leg flights for domestic journeys will boost domestic connectivity . . . and benefit regional airports.

“But it is disappointing the government is delaying these benefits by not implementing the measure until 2023.

“Cutting domestic APD while increasing it on long-haul travel shows a fundamental misunderstanding of how the UK relies on aviation for its prosperity.”

Andrew Crawley, American Express Global Business Travel (GBT) chief commercial officer, noted: “APD was supposed to be an environmental tax, yet no money has been ring-fenced for sustainable initiatives.

“The government needs to get serious by investing the proceeds of APD in the infrastructure we need to support the development of sustainable aviation fuel (SAF).

“Making SAF widely available is the only way to make meaningful progress against our net zero targets.”

If it is not, said Crawley: “It will do nothing except penalise British businesses trying to embrace the government’s own Global Britain initiative.”

Martin Chalk, acting general secretary of pilots’ union BALPA, noted: “While we welcome the reduction of domestic APD, the creation of a new band for longer haul flying makes no sense.

“It will be much harder to capitalise on free trade deals with countries such as Australia and New Zealand and it unfairly penalises those who need to travel over 5,500 km to see family.”

Keller argued: “This is another missed opportunity for the UK to lead on overhauling obsolete taxation policies that are undermining the huge investments in technology and infrastructure needed to drive the sustainable recovery of a critical sector of the economy.

“Airlines have committed globally to 2050 net-zero targets that require governments to develop pragmatic policies and implement tangible interventions – not resort to tinkering with blunt and regressive taxation that fails to support the sustainability initiatives of the industry.”

He welcomed the removal of “a longstanding anomaly where return domestic flights have been taxed higher than international flights to Europe”.

But Keller said: “Why wait until 2023? This correction should not be regarded as a tax cut but simply the government finally doing what is fair and right.

He added: “The notion that the world’s most heavily taxed long-haul travellers should be expected to subsidise a tax correction for domestic travellers underscores how APD remains not fit for purpose in stimulating a sustainable future for aviation.”

UKinbound head of public affairs Lauren Broughton called the domestic APD reduction “a positive step” but described the increased APD on long-haul flights as “a kick in the teeth” to a sector that “is only just beginning its recovery”.

She argued: “Inbound tourism brings new money into regional economies, supports over 500,000 jobs across the country and will significantly aid the country’s economic recovery and Global Britain ambitions. Imposing further taxes on an already struggling industry is counter intuitive.”

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