The F-Air Passenger Duty For All campaign has worked in the sense that the Government didn’t put up APD in the last Budget. That has to be counted as a short-term victory. What we now have is another year of educating people – particularly the public – about the tax.
It has had a significant impact on the number of people who are able to travel. The tax is very high. But it is very difficult to quantify the effect because of other changes in the industry.
Most of our customers are probably not aware that the tax even exists due to our policy of inclusive pricing.
In a sector that provides excellent value for money, an additional tax of ú40 or ú80 on a family holiday is a significant burden. We are concerned that at the lower price range in particular, any increase can have an effect on some people’s ability to take a holiday.
What strategy should the industry pursue to prevent further increases?
APD discriminates against air travel, especially on domestic routes. Train operators get subsidised by the UK exchequer, but the money raised through APD doesn’t get invested in the infrastructure of the airline business – it goes to the exchequer.
APD is adding up to 50% onto our lowest fares. For example, our ú19 single fare to Ireland becomes ú29 when APD is added. I believe it is having a depressing effect on passenger yield. APD should be fare related, levied on a sliding scale. If the low-fare market is to continue to expand, we can’t have a ridiculous tax burden.
This is difficult to judge precisely. Other factors such as the strength of sterling and the state of the UK economy clearly have a considerable influence on customer demand for holidays.
What has been the impact of APDon your company?
In general the public is increasingly surprised by the level of taxes they have to pay. Customers are not happy about it.
I think we need a pan-European campaign. For example, Norway has a seat tax that added ú20 to the cost of air travel. Also, there are the infraction proceedings being carried out against the UKby the EC. Travel companies here and across Europe have got to get their act together.
Tax is not commissionable, so our earnings are less. When you are selling a lower value ticket it makes it difficult to make any money.
APD is one of the various factors that disadvantages Britain as a destination. The others are high VAT rates and the high rate of sterling.
What has been the feedback from the public?
Our inbound customers don’t know about it. Quite simply, it’s invisible.
The public don’t know about APD because it is absorbed into their fares. They don’t complain because they don’t see it as a separate tax.
What has been the impact on your sector of the market?
It depends on whether you believe there is going to be a recession. If there was a major recession, we would have to put more pressure on the Government, because the APD would stifle travel outside the UK.
The area we are most concerned about is the short-haul city-breaks market to France and Germany. In the year to March 31, the number of packages we sold was up 8%, but from Germany and France volumes dropped by 20%. We think APD partly reduced the attraction of London. People went to Paris instead.
The industry needs to work together to explain to the Government the regressive and damaging nature of this tax – children and those on low-cost flights pay the same as business travellers. We must also consider raising the profile of the tax with our customers. The industry must do its utmost to resist any further increases.