Prime Minister David Cameron has been sent a clear message from the international aviation industry to address high Air Passenger Duty, airport capacity constraints and climate change.
Aviation’s future capability to be a pillar supporting the UK economy is jeopardised by a regulatory approach that constrains the growth of the UK’s only hub airport (Heathrow) and a fiscal policy that burdens the industry with heavy taxes, according to the head of Iata.
The aviation body’s director general and chief executive Tony Tyler (pictured) used a speech to the UK Aviation Club to urge the government to use its national aviation policy consultation to enable aviation to generate more economic growth and jobs.
“The national aviation policy discussion is a great opportunity to replace the ‘tax, regulate and restrict’ policy trajectory of today with one that supports connectivity, jobs and economic prosperity with sustainable growth,” he said.
“That’s exactly what is needed to re-start the UK economy. By refocusing the policy agenda towards competitive, cost-efficient and sustainable growth, aviation can do so much more than the already impressive support for £90 billion of economic activity and 1.8 million jobs.
“A strong aviation industry is a foundation stone of an economically strong and competitive Great Britain. That needs to be understood from the people on the high street to the Prime Minister in Downing Street,” said Tyler.
The national policy must also reduce the UK’s high tax burden on aviation.
“Chancellor George Osborne’s proposal to reduce corporate taxes from 28% to 22% by 2014 is welcome relief, but it is not a comprehensive solution. The high cost of doing business in the UK must also be addressed,” Tyler said.
“The ever increasing APD is a £2.9 billion annual burden on UK businesses reliant on connectivity. And passenger demand is growing more slowly than at other European hubs because the APD is pricing air travel out of the range that consumers can bear.”
Iata estimates the planned increase in the APD will result in the loss of 7,000 UK jobs on top of the damage that it is already doing to the economy.
Proposals have been floated to address the need for more capacity by building a new airport to serve the London region. Such a project would be enormously expensive and politically uncertain, Iata argues.
Despite the government ruling out further expansion at Hathrow, Tyler said: “For a fraction of the cost of building a new airport, the UK could get all the additional capacity needed to ensure that Heathrow continues as a great aviation hub and without the economic dislocation of moving 220,000 jobs that depend on Heathrow.”
Iata forecasts indicate that 205 million people will travel to or from the UK in 2015, accounting for about one in every seven international air travellers.
“The government needs to make Heathrow’s expansion a priority in a competitive new UK aviation policy so that the UK can realise the economic benefits of connectivity and continue to punch above its weight globally,” Tyler said.
Pointing out that the UK is the world’s second largest market for international air travel, he added: “The connectivity provided by aviation enables London to function as a global financial centre, to be a global hub of culture and to host the Olympics.
“Great Britain is an island. Aviation connects it to the global community and global economy. Government policies must recognise and nurture that important role.”
Tyler noted that London has no non-stop services to developing markets such as Manila, Jakarta, Santiago and the Chinese cities of Chengdu, Shenyang and Guangzhou, although daily services exist from continental European hubs.
Iata called on the UK to support the development of sustainable biofuels for aviation with policy measures that ‘de-risk’ the investment needed to reduce cost and increase production.
It also called on the EU to find a solution to the global impasse developing around the EU’s inclusion of international aviation in its emissions trading scheme through the International Civil Aviation Organisation (ICAO) process.
“Nobody wants a trade war. And ICAO has a process to find a solution,” said Tyler. “However, the frequent and robust reiteration by the EU Directorate General for Climate Action that nothing can be done to defer or amend the European scheme is not helpful.
“Europe’s trading partners are looking for signals that it is prepared to find solutions with the international community beyond its current plans in an agreement through the ICAO process.”
Tyler added: “Aviation’s license to grow depends upon managing its environmental impacts. We have a long history of doing precisely that in partnership with regulators.
“Over the last three decades Heathrow’s noise contour was reduced by 60%. And we have managed to contain aviation’s emissions at 2% of global manmade CO2 with a 70% improvement in fuel efficiency over the last four decades.”