Aviation industry expresses dismay following UK government’s March budget

Some UK aviation industry representatives have expressed their disappointment following a perceived lack of support from the UK’s Chancellor of the Exchequer in his March 11 budget.

Following the recent collapse of the UK regional airline, Flybe, and the big drop in bookings faced by all carriers in the wake of the COVID-19 crisis, there had been widespread hope that the Air Passenger Duty (APD) tax, levied on all flights arriving or departing a UK airport, would either be reduced or scrapped.

However, the Chancellor, Rishi Sunak, said the government would: “consider the case for changing the APD treatment of domestic flights, such as reintroducing a return leg exemption, and for increasing the number of international distance bands.” The Executive Summary document that accompanies the budget’s delivery states that those findings will be published in the spring. In the meantime, APD rates will remain unchanged for short-haul flights at £13, while the charge for long-haul economy travel will increase by £2.

Those travelling in long-haul premium economy, business, or first class will face a £4 increase, an extra £13 will be levied upon those using private jets.

Commenting upon the budget, a statement from the International Airlines Group (IAG), owners of Aer Lingus, British Airways, Iberia, Level and Vueling, said: “Given the acute pressure on business, the hike in APD will make it even harder for UK firms to trade overseas. This is a tax on business.

“Last year, IAG paid around one billion euros [€967m] in APD to the Treasury. This costs UK jobs and growth. If the government is serious about making Britain a global trading economy, the world’s highest aviation tax should be scrapped now.”

Tim Alderslade, CEO of Airlines UK, the industry body representing UK-registered airlines, said: “The review into the impact of APD on domestic aviation and the expectation that once the Brexit transition phase is over the double whammy on regional carriers will end is welcome. That said, APD as a whole – across all routes – is a damaging tax and completely counterproductive to the aims of making Britain a global trading nation.

“Just as disappointing is the complete lack of support for the sector’s net zero carbon strategy. UK aviation – alone amongst any national aviation sector in the world – has committed to net zero emissions by 2050 but this will not happen without the right policy levers from Government in encouraging new technologies and innovation like sustainable aviation fuels or electric flight.

“Aviation has been crying out for short-term support as we deal with an unprecedented crisis caused by coronavirus and the collapse of Flybe. This is the most serious period for the sector since 9/11 but questions remain as to whether this fact is understood within Government.”

Dale Keller, CEO of the Board of Airline Representatives UK (BAR UK) commented: “The entire aviation industry will be deeply frustrated that the Chancellor has shown zero support to a vital sector which the country relies upon to deliver connectivity and enable economic prosperity. Despite announcing an APD review in January in time for this Budget, the Chancellor has instead pushed a response back to Spring whilst discreetly publishing a further £2 increase to £82 on economy long-haul flights from April 2021.

“It is ludicrous that he has given concessions to alcohol but increased APD which is a tax on business, trade and consumers. Airlines had requested a temporary six month waiver of APD as a supporting measure while they deal with this unprecedented situation. The lack of action and support for aviation in this Budget demonstrates a government and Chancellor with little regard for sustaining the UK’s domestic and international air connectivity at the very time it is needed most.”

Karen Dee, CEO of the UK’s Airport Operators Association said: “At a time when the aviation industry is reeling from the impacts of COVID-19 on passenger demand and the disappearance of Flybe’s vital network of regional routes, the government should have taken bold action by suspending Air Passenger Duty for six months to help airports and airlines recover.

“While a consultation on future aviation tax reform is welcome and airports will look to engage with this process, it is deeply disappointing that the Chancellor failed to take further action in this Budget. This failure to act will put jobs at risk, damage our international connectivity and the government’s international trade objectives.

“The government must act decisively as soon as possible to safeguard connectivity and vital jobs across the UK aviation sector as well as to support businesses and regional economies that rely on their local airports’ domestic and international connectivity.”

Charlie Cornish, Group CEO of MAG, noted: “The Government is right to prioritise major and sustained investment in infrastructure. Linking up businesses and communities within the UK and to markets overseas is the only way to support long term growth for the whole country.

“However, the UK needs a thriving aviation sector to deliver Global Britain. Many airlines are looking to invest in the UK, and the Government should support them with an immediate cut to APD while it carries out its fundamental review of aviation taxes.”

The British Airline Pilots Association (BALPA) union said it is dismayed that its calls for a temporary removal of APD has not been addressed in the budget, stating: “The government has instead increased APD for long-haul flights and forecasts bringing in an extra £400m from the tax over the next two years.

“The Chancellor did announce a consultation on aviation tax reform in the spring, which is welcome, although the industry needs assistance now to support airlines facing financial difficulty this summer in wake of the coronavirus outbreak., not at the end of a lengthy consultation process.

“Coronavirus is having a huge impact on forward bookings and was undoubtedly a factor in Flybe’s collapse.

BALPA general secretary, Brian Strutton, concluded: “We called on the government last week to suspend APD for six months in an effort to support our airlines, which are already being hit hard by a reduction in bookings due to coronavirus.

“Removing APD is just one simple step they could have done to give airlines the support they need to get through what will be a difficult summer, yet the budget has been and gone and we’re incredibly disappointed that there was no mention of how our government is going to help our aviation industry.

“Unless the Government wishes to see more UK airlines go under, we must see some urgent action from the Treasury – we can’t wait until spring for this situation to be addressed.”

 

UK APD at a glance: 

  • APD shorthaul: Economy £13 – Premium £26.

Longhaul APD will increase by 2.5% in April: Economy £78 – going up to £80 and Premium £172 – going up to £176 on April 1, 2020. The March 11