Four leading airlines have called on the government to scrap Air Passenger Duty claiming its damage to the UK economy will far outweigh the benefits of revenues raised by the tax.
Launching their united Axe The Tax campaign, the chief executives of easyJet, Ryanair, British Airways’ parent International Airlines Group (IAG) and Virgin Atlantic publicly signed a letter to Chancellor George Osborne, challenging him to conduct an independent review on the economic impact of APD.
The airlines argued the tax was destroying leisure and business tourism, “strangling” the jobs market, and keeping foreign investors away. APD raises £2.2million a year, they said. Last year, BA passengers paid out £348 million in APD; Virgin Atlantic passengers paid £140 million; Ryanair passengers £150 million and easyJet passengers £120 million.
Willie Walsh, chief executive of IAG, said: “This is the probably the first time the chief executives representing Ryanair, Virgin, British Airways and easyJet have ever sat down together and that shows how important this is to us. It’s an issue that goes beyond the fierce rivalry that exists between us.”
He added: “Passengers numbers at UK airports have fallen in the last three years and are now at a lower level than 2004.” In 2010, there were 7.4 million fewer passengers using UK airports while numbers using European airports increased by 66.3 million.
The four airlines said they were laying aside any differences to launch a concerted long-term effort. “This is not going to end today. We will continue to keep highlighting this issue,” said Walsh, who said removing the tax would allow the UK to become more competitive and generate more jobs.
Michael O’Leary, of Ryanair, argued other countries which had introduced a similar tax had subsequently ditched it because of the negative impact on passenger numbers, tourism and entry-level jobs. “I started out as a hotel porter and these are the kind of jobs the UK is losing because of APD.”
A tax introduced in the Netherlands in 2008/2009 was abandoned after a year because the damage on the Dutch economy were four times greater than the £300 million revenue it produced, while similar schemes have been scrapped in Belgium, Denmark and Norway, he said.
Easyjet’s Carolyn McCall said the tax was “easy money” for the government, adding:. “The government can find out for themselves how damaging this will be to the economy and jobs.”
According to a survey of 3,000 consumers by the airlines this week, 77% thought APD was an unfair tax. Virgin Atlantic’s Steve Ridgway said: “It’s evident it’s putting business travellers off coming to the UK and putting families off travelling. We want everyone to come to the UK after the Olympics and that’s not going to happen if we see APD remaining at this level or increasing.”
He cited the small number of Chinese visitors coming to the UK as evidence of the impact of APD. Of three million annual Chinese visitors to Europe, only 175,000 come to the UK. “If you look at the value of that spend [of Chinese visitors] it significantly outweighs the revenues from APD.”
The four airlines support more than 200,000 jobs in the UK and contribute 3.5% towards gross domestic product (GDP).
The letter to the chancellor, which comes ahead of an expected rise in APD in the autumn forecast statement on November 29, states: “For hard-working families, APD is a tax too far for the privilege of taking a well-earned holiday. It is also a tax on tourism and a tax on business.
“Aviation doesn’t just drive exports – it is a major exporter in its own right with our airlines earning nearly £11 billion of foreign revenues every year. Tourism is one of the UK’s most important earners and is worth £115 million to the UK economy.”
APD is expected to rise from £12 per person to £16 per person for economy flights of up to 2,000 miles for flights after April 1, 2012. An estimated five million travellers who have booked to fly from the UK after next April are likely to face the additional charge when the expected hike is back-dated.
The Axe The Tax campaign follows reports this month that the industry has so far failed to make its case on APD and must wait until the next election for policies to change. Lobbying efforts to date were last week dubbed “amateur” by the new head of the Pacific Asia Travel Association (PATA), Martin Craigs.