Analysis: Industry keeps pressure on as APD hike looms

Industry leaders have reluctantly resigned themselves to the latest round of increases in Air Passenger Duty (APD) on November 1, but have pledged to maintain pressure on the government for a reversal.

British Airways boss Willie Walsh slammed the tax as “a disgrace” in a speech to Caribbean tourism ministers in Barbados on Sunday. He has promised to spell out the same message to chancellor George Osborne at a meeting later this month.

Walsh will also take his message to Abta’s Travel Convention in Malta where he is due to give the keynote speech on Tuesday.

Speaking at a Caribbean Tourism Organization (CTO) conference last weekend, Walsh said: “We raise the issue of APD whenever we meet ministers. The reception is sympathetic, but has not translated into action. We need to campaign harder. I want to make sure they understand the risk. We cannot continue to add taxes to the airline industry.”

APD on UK flights to the Caribbean is poised to rise to £75 on an economy fare and £150 on other tickets – the second major increase in 12 months. The tax hits the tourism-dependent region doubly hard by being in the higher, band C rate of tax while neighbouring Florida and the rest of the US is in band B (see box). 

Leading companies, Abta and other industry bodies have lobbied ministers for more than 15 months on the issue. The aim now is to force a rethink on future rises and get the tax revoked or reduced when airlines join the EU emissions trading scheme (ETS) in 2012.

Walsh warned: “The government expects revenue from aviation tax this year to total £2.3 billion. In five years it expects receipts to be £3.8 billion. ETS has the potential to be even more devastating [and] the government clearly wants to continue with APD after the ETS is introduced.”

He told Travel Weekly: “I genuinely hoped to see the November 1 increase set aside. It is unrealistic to expect the rise not to go ahead now, but I would like to see a reversal and the idea of raising further revenue from air travel needs to be addressed.”

The BA boss added: “I accept the government has to address the economic situation. But we will not get out of economic difficulty by increasing taxes. Ultimately, people will not go to destinations.”

Walsh remains resolutely opposed to a proposed switch from APD to a tax on aircraft, an option preferred by Tui Travel and Thomas Cook. However, there is no sign of an expected consultation on these proposals.

The CTO is preparing a report on the impact of APD both in the Caribbean and the UK to present to MPs during World Travel Market in November, when a delegation of ministers will again be in London.

Richard Skerritt, chairman of the CTO council of ministers, said: “We intend to lead the growing global consensus – particularly among Commonwealth countries – that the cost of this tax far exceeds any benefit [to the UK government].”