Call for Air Passenger Duty Reform
I am writing to respectfully draw your attention to a critical issue which can no longer await resolution now that the country has voted to leave the EU and we are beginning to see turmoil in our financial markets and our economy under threat of serious and lasting damage. This is the issue of Air Passenger Duty (APD) and the need to address the very real stranglehold it is having in curbing the growth of regional economies.
HM Treasury has yet to comment on the outcome of the discussion paper regarding the options for supporting English regional airports against the impacts of APD devolution. Now is surely the time to address this issue, particularly with the Scottish Government pressing ahead with plans for a 50% reduction in Air Passenger Duty.
HM Treasury has previously argued that it cannot abolish APD given the scale of its contribution to the public finances. In the absence of outright abolition, Flybe firmly believes that APD could be amended in a fiscally neutral manner to deliver an economic benefit to the UK regions, a stated aim of the Government. This could be achieved by lowering the levy at regional airports by 50% in line with what is being planned in Scotland, funding it through an increase at the large, slot-constrained airports in London such as Heathrow and Gatwick.
A decrease in APD at regional airports would help address the disproportionate impact on the UK regions of the current APD regime whereby a typical domestic passenger can be charged up to 19 times the tax per mile of a passenger on a long-haul flight. This iniquity is doubled when a return international passenger suffers this charge just once, but a domestic traveller is taxed twice as APD is a UK departure tax. The corresponding increase on passengers using Heathrow and Gatwick would be akin to a congestion charge, a concept already well established in our economy as best shown by the London road congestion charge.
The benefits of APD reform as proposed by Flybe are manifold. First, it would provide a more level playing field between regional and international travellers and assist the development of regional airports and economies, particularly in light of the uncertainty after the referendum vote to leave the EU. It would also remove potential market distortions and risks of unfairness on passengers in England from APD devolution and reduction in Scotland and Wales. Finally, it would provide an economic incentive for the immediate use of spare runway capacity available today at regional airports neighbouring London such as Birmingham Airport, given new runway capacity at either Heathrow or Gatwick could take more than a decade to come on stream if it is ever approved.
Flybe is not only Europe’s largest regional airline. We operate more UK domestic flights than any other airline, delivering unrivalled regional connectivity to and from 37 UK airports. This accounts for 53% of all internal flights within mainland Britain. Over half our passengers are travelling on business, driving trade and economic growth.
We therefore urge you to act as a matter of urgency to address the APD issue once and for all and, by so doing, deliver a benefit to all regional passengers and especially to those whose very business success plays a critical role in the continued success of the British economy.