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Travel industry news

29 Oct 2018

BY James Chapple

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Budget 2018: Short-haul APD frozen again; airlines hit out at long-haul hike

Air Passenger Duty (APD) on short-haul flights will remain frozen in 2020-21 - but long-haul rates are set to continue rising in line with inflation, it has been announced.

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Budget 2018: Short-haul APD frozen again; airlines hit out at long-haul hike

Chancellor Philip Hammond on Monday (October 29) set out a new price structure for the tax, which is levied on all ex-UK flights, during his final budget before the UK leaves the EU next March.


APD was introduced in 1994 at a flat rate of £5 to UK/EU destinations and £10 elsewhere.


However, the charge has increased significantly to between £13 and £78 for Band A destinations (within 2,000 miles) and £78 and £468 for Band B (2,001+ miles).


From April 1 next year, the Band B standard rate will increase to £172 and higher rate to £515.


The chancellor’s budget statement read: “Short-haul APD rates for 2020-21 will not rise, remaining at the same level they have been since 2012, benefiting 80% of passengers.


“Sixty-four long-haul rates will increase in line with RPI [retail price index]. The rates for long-haul economy will increase by £2, and the rates for those travelling in premium economy, business and first class will increase by £4. Those travelling long-haul by private jets will see the rate increase by £13.”


Airlines UK, the trade body for UK registered airlines, said the announcement sent out entirely the wrong signal with the EU preparing to leave the EU.


“APD is nothing but a tax on Global Britain,” said chief executive Tim Alderslade. “Rates are already the highest in the world, with the burden on passengers travelling from and within the UK having risen more than 1,000% since its introduction, and set to hit an eye watering £4 billion by 2022-23.


“The UK was only country in Europe to see a loss of direct connectivity last year, and today’s increase on business and holiday travellers will make it even harder for UK airlines to grow our international connectivity, establish new trade links and encourage more tourists to visit the UK. With Brexit just around the corner, it is a missed opportunity to have truly transformed the UK’s international competitiveness.


“Ministers can talk all they like about reaching out to the world but today’s increase demonstrates that their words are not matched by their actions and will remain so until they get rid of this damaging tax”.


In a statement, British Airways owner IAG echoed Alderslade’s comments. “It’s ironic this Brexit budget has undermined Britain’s global competitiveness by upping APDy, the world’s highest aviation tax, again.


“We want to offer more flights to key trading markets, like our European competitors, but APD stifles route development to new emerging markets. If Britain wants to compete on the global stage post Brexit, it should be scrapped now.”


Virgin Atlantic, meanwhile, revealed APD now accounts for more than a quarter of its lowest fare.

 

Abta chief executive Mark Tanzer added: “While we recognise that the chancellor’s freeze on short-haul air passenger duty will come as some relief to the industry, another inflationary increase for long-haul will further reduce the UK’s international competitiveness, particularly at a time when Brexit means the UK should be seeking to establish new links with destinations across the world.

 

“We urge the chancellor to commission detailed economic modelling, and to consider cutting APD, at the earliest opportunity, to boost the UK economy.”

 

APD is frequently criticised by the travel sector on the proviso it stymies inbound and outbound tourism.

 

Last year, in the wake of the Monarch Airlines failure, the chancellor used the budget to announce the Airline Insolvency Review.

 

Chaired by Peter Bucks, the review is due to report early next year, and may yet take account of the recent failures of Primera Air and Cobalt Air.

 

Pre-announcements included a commemorative Brexit 50p coin. The EU, the Guardian reports, has no plans for a special Euro coin to mark Brexit.

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