Travelmole Guest Comment: APD is one step backwards for UK

Industry analyst travel and tourism at Euromonitor International, Nadejda Popova, outlines the impact of the APD rise.

“The controversial decision by the UK government to increase the Air Passenger Duty (APD) has sparked a global debate with national and international organisations from the World Travel & Tourism Council (WTTC) to the Association of British Travel Agents (ABTA) expressing their dislike for the new tax.

Several major concerns have been identified:

• The long-term detrimental effects APD will have on the tourism industry, possibly resulting in a sharp decrease in inbound and outbound passengers using British airports.

• Fears that APD will negatively impact business travel and will force customers and airlines to choose other neighbouring countries as their hub thus making Britain a less attractive country for tourism.

• Major inconsistencies in its structure, seeing as the distance to the capital city of each country is taken as the measure and applied to all destinations within that country. Travellers to the US, for example, will pay a rate for Washington DC even if they fly to further-afield destinations such as Texas. Flights to the Caribbean will be taxed at a higher rate even though the region is the same distance as Texas from the UK.

• The major casualties of these new rates are expected to be lower income passengers, big families and long-haul travellers, witnessing more than a 100% rise on their departure tax for flights to Australia, the US and Caribbean.

• A substantial decline is expected in future tourism spending by incoming travellers in developing destinations – a serious setback for eliminating poverty in those countries.

• The experience of Belgium, Greece, Spain and the Netherlands must be considered. The latter introduced a similar tax but abandoned it after a year due to its wide-reaching negative effects on the economy, local airports and aviation sector.

• Additional aircraft operators such as private-jets and cargo operators are exempt from paying APD which undermines the duty’s major goal to reduce carbon emissions.

Introduced first in November 1994, the APD currently stands at £10 at a reduced rate and £20 at a standard rate for a UK passenger travelling to European destinations. For all other destinations, it is £40 and £80 at reduced and standard rates respectively.

With the new tax aimed at tackling climate change, a four band system will be used to measure the distance between London and the destination country’s capital. It will be introduced in two stages in November 2009 and November 2010.

At a time when other sectors are seeking financial stimulus from the UK government, this controversial duty raises the question why airlines are being burdened even more so with taxation, exactly at the time when they need to become more competitive internationally to secure their survival.”

Band Rates (for economy class only) Standard Rate (all other)
From 01/11/2009 01/11/2010 From 01/11/2009 01/11/2010
Band A [0-2,000 miles] £11 £12 £22 £24
Band B [2,001-4,000 miles] £45 £60 £90 £120
Band C [4,001-6,000 miles] £50 £75 £100 £150
Band D [over 6,000 miles] £55 £85 £110 £170

Source: HM Revenue & Customs (HMRC) website