How to stop Air Passenger Duty (APD)

The British government seems intent on whipping up its very own perfect storm for the travel industry. Not content with extortionate visa costs, spiralling passport fees and regular rises in airport passenger duty, they’ve burdened the country with so much debt it looks unlikely that sterling will ever see its previous peaks again.

The most pressing concern for the travel industry is the huge rises in airport passenger duty scheduled for November 2009 and November 2010. Previous rises in APD may have had limited impact, but next November’s rise could well be the tipping point. A couple considering a quick week in the Caribbean will find the £190 APD  a significant obstacle in the way of their booking.

Will petitions have any influence on government thinking? It’s very unlikely. The country is flat broke and the government sees APD as a useful source of income. Everyone knows APD isn’t the environmental tax it was originally heralded as, but the government doesn’t really seem to care. Unfortunately for travel, the environmental lobbyists are a lot stronger than our uncoordinated bunch.

A lot has been made of the recent reductions or abolitions in APD in Holland, Belgium, Spain and Greece. But it is hard to compare the UK to these countries. Spain and Greece are much more dependent on tourism for their economies than the UK. Holland and Belgium are limited in their ability to tax flights because airports in neighbouring countries are within short travelling distance. If Holland drops APD, Belgium is then under severe pressure to follow suit. Also if flights are expensive in Holland, the Dutch will just get in their cars and spend all their Euros in France and Germany. At least by flying, the government gets some of their holiday money. You can only really compare the UK to other islands and tellingly Australia has also increased its passenger tax from AU$9 to AU$47.

But there are two things that the lobbyists need to look to in the Dutch decision. One is their research that despite income from the tax of around €365m, it actually cost the economy more than $2bn in lost revenue. The other is that passenger figures and job losses announced by Schiphol had some bearing on the decision.

So how does the travel industry fight APD? I think it needs to do the following:

• Concentrate on the financial impact on the UK economy. A lot has been made of the financial impact to Caribbean islands, but this will cause few concerns for British MPs. If you can prove that the cost to the UK economy of APD will be greater than the financial benefits, it suddenly becomes harder to justify.
• Use the big guys more. That means more public statements from Virgin’s Branson and BA’s Walsh.
• Turn it into a political debate. The UK election is less than a year away. If the Tories put it in their manifesto that APD would be abolished, it would be popular with “Middle England”. They would be under pressure from the environmentalists and would also be under pressure to show how they would pay for it, but the benefits could outweigh any potential pitfalls.
• Use the mainstream media. There was a particularly scathing piece by Steve Keenen in The Times this week about passport fees. And the comments in their recent APD article show that the tax is not very popular with the voting public.

I fear it’s going to take a bit more than a petition to get the APD down to sensible levels.

Tagged as: APD