The U.K. government on April 1, 2012, will
increase by about 8 percent the air passenger duty levied on passengers
departing U.K. airports. The new charges will range from £13 for tickets on the
shortest routes in the lowest class of travel to £184 for the longest routes
flown in all other classes of travel. The announcement of the increase came
after a public consultation process and followed a plea last month from chief executives at British Airways, easyJet,
Ryanair and Virgin Atlantic to ditch APD entirely.
In a response to the consultation, issued
today, Her Majesty's Treasury concluded that the APD structure—in which
passengers are charged based on the distance flown and class of service—will
remain unchanged.
"Many favored a reform based on moving
to two distance bands, whilst others expressed support for the alternative
three-band structure or retaining the existing four bands. Other ideas included
the suggestion of moving to a single rate of duty and alternative models based
on more distance bands," according to HM Treasury. "The government
recognizes that no banding structure will be entirely free of anomalies"
and therefore opted to keep intact the existing four tiers.
The government also noted that some
stakeholders argued against maintaining class-of-service distinctions, which
they suggested have "a disproportionate effect on premium economy
passengers, making it hard for airlines to market and sell the product."
Moreover, "a number of stakeholders argued that the typical premium
economy service was closer to economy than business class," according to
the consultation response document. HM Treasury therefore concluded that
"any attempt to define premium economy for taxation purposes would
therefore increase the complexity of the tax."
Following the publication of the consultation
response document, the U.K. airline chief executives—Carolyn McCall from easyJet, Willie Walsh from British
Airways parent IAG, Michael O'Leary from Ryanair and Steve Ridgway from Virgin
Atlantic—jointly issued a statement calling the ADP "a sham and a waste of
taxpayers' money." They added that the ADP "sends a message to the
world that Britain is a difficult and expensive place to do business" and
that they "have no doubt" an independent study would "confirm
that APD's negative effect on U.K. GDP significantly outweighs its revenue benefit
for the Treasury."
Meanwhile,"to make APD fairer," HM Treasury also confirmed plans
to add business aviation to the APD scheme, effective April 1, 2013. All
flights on business jets weighing at least 5.7 metric tons will be subject to a
charge. "The extension of APD to business jet flights is not expected to
have a significant effect on overall demand, given that generally APD will
account for only a small fraction of the final price of hiring a business jet,"
according to HM Treasury. "The broader macroeconomic effects of the policy
are expected to be negligible."
The document also reiterated a recent move to
cut APD on long-haul flights departing from airports in Northern Ireland
"in recognition of the unique challenges faced by Northern Ireland in
attracting air traffic into its airports. Northern Ireland shares a land border
with the Republic of Ireland, where the rate of aviation duty is substantially
lower."
The consultation process, which ended in June,
collected more than 500 responses from airlines, airport operators, travel
agencies, trade groups, business interests, consumers and members of
Parliament.