Willie Walsh on APD
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Willie Walsh was on Sky News this morning giving his reaction to George Osborne’s hike in Air Passenger Duty.
You can see a short excerpt here.
At a time when the airline industry is seriously struggling, it does seem a strange industry to tax (American Airlines’ parent company sought Chapter 11 bankruptcy protection last week)
Here are some of the ‘economics’ of the indirect tax:
- the tax on economy long-haul flights of more than 6,000 miles, such as to Australia, will rise from £85 to £92 per person. That means £368 tax for a family of four – or a rise of £28.
- If the family decides to upgrade to premium economy or above, the APD tax increases from £170 to £184 per person – or a rise of £56. A family of four flying premium economy will pay a whopping £736 – or £112 more
- Families flying short-haul to the Continent, or less than 2,000 miles, will see APD rise by £1 per person to £12 in economy, or by £2 to £24 in all other classes.
Willie Walsh (CEO of IAG (BA-Iberia)) unsurprisingly is very much against it. His key points in the interview with Sky was:
- it is not a green tax: the tax does not vary with CO2 emissions and none of tax revenue is hypothecated on environmental issues
- it is making the UK uncompetitive for business travellers (the UK is one of a handful of countries that has an APD, and it is the highest by some margin)
- The UK’s aviation tax is twice Germany’s rate; and 20x the rate of France: and no APD in the remaining EU countries.
- It is deterring tourism towards the UK (and the loss of positive multipliers)
- Not sure on his source but he quotes that 3.3 million business passengers were deterred from travelling to UK as a result of the APD (he doesn’t differentiate the effect of the recession though (with YED issues).
- Netherlands introduced an APD in July 2008: it only raised 312 million euro, but they had a net negative impact of 1.2 billion euro.
- Not a global tax, which would be more acceptable (but a coordination problem).
It is true that for many, airline travel is likely to be PED inelastic and so airlines will pass this APD through to customer ticket prices.
Read more here.
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