Scottish government says it will seek powers if re-elected to cut Air Passenger Duty to help boost flights
Ryanair CEO Michael O'Leary and Scotland's First Minister Alex Salmond at the opening of the Ryanair hangar at Prestwick
Tue 22 Feb 2011 – Scotland’s First Minister, Alex Salmond, has said his Scottish National Party will seek powers to reduce UK Air Passenger Duty (APD) on Scottish air travellers if re-elected to office in parliamentary elections in May. Salmond believes lowering the duty would reduce airline fares and help encourage tourism and inward investment to Scotland. The call coincides with the release of a report commissioned by BAA-owned Aberdeen, Edinburgh and Glasgow airports that estimates last November’s hike in APD could lose Scotland’s airports more than one million passengers over the next three years and cost the Scottish economy £77 million ($124m) in lost tourism spend. Latest figures from the UK CAA show the three airports handled over 1.3 million fewer passengers last year compared to 2009. Meanwhile, the Association of German Airlines forecasts the new German eco tax introduced last month will reduce passenger numbers by five million during the next two years.
Salmond believes that cutting APD would not impact on Scotland’s climate change goals as having more direct flights abroad would reduce the need to travel and connect through London Heathrow and would be cost neutral as lost tax revenue would be made up for by the increased number of flights. “Theoretically, if you were able to double the volume of direct flights, you could halve the level of tax,” he said at the opening of a new Ryanair maintenance hangar at Prestwick Airport.
“The problem for Scotland is that it has suffered from the APD tax,” added Ryanair Chief Executive Michael O’Leary. “Scotland has a high proportion of domestic flights. The only way forward is to grow the number of direct flights from Glasgow, Aberdeen, Edinburgh and Inverness to Europe.”
The UK government is planning to devolve some tax raising powers to the Scottish Parliament but has not included APD in its proposals because of possible changes in the tax from a per-passenger to a per-plane basis.
“We need to have control of APD in Scotland so it facilitates, not prevents, more flights,” said Salmond.
A Green Party member of the Scottish Parliament said the argument that flights could be increased without “blowing a hole” in the country’s carbon emissions targets did not stand up to scrutiny.
Along with last year’s 7% fall in passenger numbers at Scotland’s three leading airports, airline BMI announced last month it was dropping its shuttle service between Heathrow and Glasgow, citing the route had become unprofitable.
The Scottish airport report was carried out by York Aviation, which has carried out a number of economic and social impact assessment studies on behalf of airports and airlines. It estimates that Scottish airports overall are set to lose around 1.2 million passengers over the next three years as a result of the APD hike, including around 150,000 inbound international visitors. Domestic routes could be hit harder, losing almost 500,000 passengers, while the long-haul market could decline by as much as 5%.
The report suggests a drop in demand of this scale could undermine the long-term viability of some routes and harm the prospects of further route development. It also notes the impact on “lifeline” routes to the outlying Scottish islands.
Benchmarking with the rest of Europe, York Aviation finds the UK’s approach to airline passenger taxes out of step with its competitors. It says Ireland, Spain, Denmark and the Netherlands had either reduced or abolished aviation duty in order to boost air travel after the worst downturn in aviation history.
Commenting on the report, Amanda MacMillan, Managing Director of Glasgow Airport, said: “Scotland needs a thriving airline industry if it is to compete in Europe and attract jobs, tourism and investment.
“Our geographical location means we are heavily dependent on a strong and diverse international route network. However, with the highest aviation taxes in Europe, Scotland is at risk of losing out on valuable inward investment and inbound tourism.
“Quite simply, if it is too expensive to fly to Scotland, tourists and airlines will go elsewhere. Given the importance of tourism to the national economy, and the number of jobs our airports provide, we believe Ministers must look again at the impact of this damaging and unfair tax.”
Figures just released by the UK Civil Aviation Authority show Edinburgh, Glasgow and Aberdeen airports handled 17,879,000 passengers in 2010, compared to 19,240,000 in 2009. The 7% decline contrasts with a fall of 3.5% across all UK airports.
In the UK as a whole, the CAA reports airport passengers at 210,642,000 for 2010, the fourth year in a row that numbers have dropped from the previous year, and the lowest since 2003. UK aircraft movements in 2010 totalled 2,927,000, the lowest since 1994.
In a recent speech in London, IATA CEO Giovanni Bisignani criticised UK government policy over what he described as its isolated and punitive approach to managing aviation emissions, and he singled out APD as a £2.7 billion ($4.3bn) burden on the industry.
“That is enough to offset all UK emissions – not once, but four times. To borrow a UK phrase ‘this is potty’. Environment policy should not be designed around paying the bills for the government’s failure to effectively regulate the financial sector,” he said.
He called for an immediate end to APD and for the UK and Europe to cooperate on a global framework for economic measures coordinated through ICAO.