The aviation industry has vowed to continue its fight against air passenger duty. Neil Hodgson reports

AIRLINES and airport operators will continue to lobby the coalition Government for changes to air passenger duty (APD), even though they are “banging our heads against a wall” according to the owner of Liverpool John Lennon Airport (JLA).

Craig Richmond, chief executive of JLA parent Peel Airports, fears a continued decline of the aviation industry in the face of the coalition and Treasury’s intransigence on APD, introduced in 1994 for flights originating in the UK.

Chancellor George Osborne confirmed in his Autumn Statement last month that the proposed 8% increase in APD next April will be implemented, despite intense lobbying by airport operators and the “big four” airlines of Ryanair, Easyjet, Virgin and the former British Airways (BA), now International Airlines Group after its merger with Spanish carrier Iberia.

Under the new rates, from April next year, passengers in economy class flying no farther than 2,000 miles from the UK will see their APD rise from £12 to £13.

In the next band up – covering flights from 2,001 to 4,000 miles – economy passenger APD will rise from £60 to £65, while those flying economy on trips between 4,001 and 6,000 miles will see their tax rise from £75 to £81.

APD for economy passengers on flights of more than 6,000 miles (such as trips to Australia) will find their APD rising from £85 to £92 in April, 2012.

APD for passengers in business class and first class will range from £26 on the shortest trips to as much as £184 on the longest ones from April.

Last week, the Treasury issued its response to consultations on the reviled APD, claiming: “The Government has been consistent that the aviation sector must play its part in reducing the deficit and restoring the public finances.”

This ignited a furious response from airlines and airport operators who interpreted it as a clear indication that previous claims by the Government that APD was an “environmental” tax to combat the effects of aircraft CO² emissions were a charade, particularly as APD will now create a double whammy for travellers after the introduction next month of the European Union’s (EU) emissions trading scheme that will almost certainly be passed on via higher ticket prices.

Canadian-born Mr Richmond says he despairs at the coalition Government’s attitude to APD. “It’s crazy to say ‘fewer people are flying, let’s tax them more anyway’,” he said.

And Mr Richmond said the UK’s stance on air tax was contrary to most other countries that have either refused to introduce it, or axed or reduced existing taxes.

He said: “Most countries treasure their aviation industry because it is such an important part of business and tourism, and I just don’t get that feeling here.”

Mr Richmond also highlighted the apparent unfairness of taxes from aviation being used to pay for other forms of transport, such as the proposed High Speed Rail 2 project, and other rail schemes.

He said: “We pay a lot of tax besides, and saying it is our duty to pay APD is fine, but money goes out of our industry and into other industries, ie, rail.

“Why doesn’t rail pay its fair share?

“I wonder what people would feel if they got on a train at Lime Street and their ticket said ‘£10 of this goes to the airport’? It goes in subsidies to other transport.”

There is also a feeling that aviation is the Treasury’s new cash cow, and Mr Richmond added: “There is no love lost between Ryanair, Easyjet, BA and Virgin in the business world, but they’re all saying this is a big mistake.

“Our tax is eight times the world average.

“Everyone knows we’re heading into a very difficult time. If we avoid a second recession we will be pretty lucky, and there will be effects from that, but I would point out that in countries that don’t have this (tax) they have seen growth (in air travel and tourism).”

Ryanair chief executive Michael O’Leary estimates that APD has led to 30m fewer overseas visitors to the UK over the past five years.

Mr Richmond also warned that punitive taxes could cause passenger numbers to fall, leading to airlines concentrating on countries without APD. He said: “Ryanair has taken 20% of its capacity out of the UK, and even BA will base aircraft in Madrid through their ties with Iberia. We talk about businesses with mobile assets – these are the most mobile assets in the world, and I would be terrified if I was an MP.”

In the meantime, he said the airport will continue to try and persuade the Chancellor to reconsider. He added: “I worry that the decline of the air industry will continue. It is going to be a gradual decline that hurts everybody.

“We’re going to continue lobbying. We will just keep on trying to show the worth of the aviation industry.

“But will the Government listen? I don’t know. Clearly not yet. We’re banging our heads against a wall.”

Easyjet, the biggest operator by passenger numbers at Liverpool JLA, insisted it, too, will continue to press the case against APD.

Corporate affairs manager Andrew McConnell said: “We are going to continue our campaign to encourage the Government to produce an independent study on the true economic value of APD. We still believe it is having a detrimental effect on the economy.”

And he urged the Treasury to follow other European states and acknowledge the damage the tax inflicts on aviation, saying: “It was having a detrimental effect in the Netherlands and was scrapped, Germany is going to scrap it, Ireland is going to reduce it and Northern Ireland is considering scrapping it in its entirety. This is why we will continue our challenge to the Government to publish an independent report.”

But Mr McConnell warned APD will eventually have detrimental consequences for UK travellers and the economy, saying: “Airlines have already pulled routes and capacity.

“We don’t need to do that yet, but we are watching the situation very closely.”

Ryanair, the second-biggest operator at Liverpool JLA, was, as ever, pugnacious in its reaction to April’s APD rise.

A spokesman said: “Like other UK airlines, we are deeply concerned at the Government’s decision to further increase APD – a tax on travel and families – which will undoubtedly lead to further flight, route, job and visitor cuts in the UK next year.

“It is about time the Treasury stopped lying that this is an environmental measure, when it is simply highway robbery. The Treasury’s line that ‘other European countries apply similar travel taxes’ is untrue, when Spain, Greece, Belgium and Holland have already scrapped these taxes and Ireland has reduced its travel tax from 10 euros to 3 euros per passenger.

“Like many other airlines, we believe that the Treasury – if they had any intelligence and/or felt the need to tax tourism – should apply this tax to hotels, B&Bs and restaurants, rather than flights, which would at least mean that tourists would still visit the UK first, before they are taxed, rather than using this disastrous APD tax which is sending millions of potential UK visitors to Spain, Italy, France and Portugal, where they don’t pay these stupid travel taxes, and where they are frankly laughing at the stupidity of the UK Government’s failed tax and tourism policy.”