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Govt May Reform Air Passenger Duty

January 16, 2020

By Paul Homewood

 

 

A quick round up of some interconnected news items:

First up, greens are up in arms at suggestions that the government will reform or even abolish Air Passenger Duty for domestic flights, following a rescue deal for Flybe:

 

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The immediate future of Flybe was secured on Tuesday night after ministers agreed a rescue deal with shareholders to keep Europe’s largest regional carrier flying.

The package of measures includes a potential loan in the region of £100m and/or a possible short-term deferral of a £106m air passenger duty (APD) bill, plus a pledge to review taxes on domestic flights before the March budget.

After the spectre was raised of another UK airline failure, Flybe’s owners Connect Airways – a consortium led by Virgin Atlantic – were persuaded to commit millions more to cover ongoing losses.

The airline has argued it is particularly hard-hit by APD, which is charged on each passenger on a flight taking off in the UK. While all short-haul economy flights, including domestic, are charged at the same rate – £13 – the tax is applied to each leg of a domestic return flight. That means, for example, that a return Flybe flight from Cardiff to Manchester is taxed at £26, while the duty on a Glasgow to Malaga return costs half that….

The government had been urged by MPs, unions and business to save Flybe, which serves almost two in five domestic UK flights and employs more than 2,000 people. It carries 8.5 million passengers a year between 56 airports across the UK and mainland Europe, and is the main airline at regional airports including Belfast, Southampton and its Exeter base….

Potential moves to ease APD were condemned by environmental groups. The MEP for South West England – a constituency that includes Flybe’s Exeter home – Molly Scott Cato of the Green party, said it was “absurd to suggest that we should provide a further boost to the aviation industry”. She highlighted that routes deemed socially necessary could be subsidised under EU rules – Flybe’s Newquay to London route is already funded with state aid.

Greenpeace UK’s chief scientist, Doug Parr, said: “The government cannot claim to be a global leader on tackling the climate emergency one day, then making the most carbon-intensive kind of travel cheaper the next. Cutting the cost of domestic flights while allowing train fares to rise is the exact opposite of what we need if we’re to cut climate-wrecking emissions from transport.”

https://www.theguardian.com/business/2020/jan/14/flybe-saved-after-successful-last-ditch-talks

 

Evidently Greenpeace and their cronies would rather see 2400 jobs go down the drain.

Just as important though is the role that airlines such as Flybe play in regional connectivity. Doug Parr might like us all to go by train, but in reality spending several hours on a train to get from Southampton to Glasgow is not an option for most people.

At a time when we are supposed to be driving growth in the regions, shutting down domestic flights would be a disastrous own goal.

 

 

Tim Newark takes things a step further in the Express (before the government plan was announced):

 

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Air Passenger Duty (APD) has always been an unwelcome tax on hard-working people flying abroad on holiday, but now it is set to cost 2,300 UK jobs at Flybe. If the Prime Minister wants to deliver on his pledge to improve transport connections between UK regions, he must waive this tax and encourage competitiveness.

UK air carrier Flybe stands on the brink of collapse thanks to the massive burden of a tax that is not imposed on either rail or coach passengers. Some £106million of tax is due this year unless the Government steps in to defer it over a longer three-year period. That’s an unfair fiscal hit on air passengers and air companies. Last year, Flybe accounted for 38 per cent of all UK domestic flights and eight ­million passengers. Owned by a consortium of Virgin Atlantic, Stobart Group and Cyrus Capital Partners, it’s a major player in Boris Johnson’s commitment to improving infrastructure within the UK.

It’s route from London to Cornwall is so important it is already part subsidised by the Government. Other routes may be commercially unviable but are necessary nevertheless.

Fast travel between major ­cities in the UK is vital for encouraging business.

Of course, no private company should be immune from going bankrupt and the Government’s reluctance to intervene is understandable as it could encourage other failing ­businesses to seek rescue with taxpayers’ money.

Yet this is not a case of a bad business model but over-burdensome tax harming the ability of a company to survive.

Tax needs to be tailored to provide a level playing field and APD is distorting the market.

Air passengers pay £26 per person in APD for a domestic return journey – and higher rates for longer flights abroad. It’s levied each time an aircraft takes off from a UK airport so hits domestic carriers especially hard.

In total it generates £3.7billion for the Government.

That’s a lot of money coming out of the air industry and it’s not just the air companies that are suffering.

More than 25 UK regional airports serve Flybe, employing thousands of people in ancillary services and their competitiveness with other European airports is also damaged by this unnecessary tax.

If Boris does intervene, he is right to cut the tax across the entire air industry to help all passenger carriers.

It is no surprise that environmental activists are up in arms over this, with Greenpeace saying it would be a “shocking decision” as flying is high in carbon emissions.

They want to see more taxes on flights so that only the rich can afford to go abroad on holiday.

Not only is that wrong, attacking the poorest in society, but it is also a massive hurdle for business.

It would be wonderful if we could all cycle to work or catch a train for a meeting.

But sometimes business people need to attend meetings quickly and efficiently, not ­dawdling along on a journey that takes a day rather than an hour to get there.

Brexit Britain must decide whether it is open for global business or not, preferring to pull up the drawbridge in pursuit of a carbon neutrality that shackles enterprise and loses jobs.

It is simply a question of striking the right balance between protecting the environment but also enabling us to work hard and create a prosperous society for all.

Constant catastrophising about climate change adds very little to what should be a ­measured debate.

https://www.express.co.uk/comment/expresscomment/1228365/Brexit-news-air-travel-airline-taxes-Tim-newark

 

As he alludes, it is not only APD on domestic flights, but international ones as well which is a problem.

 

 

Meanwhile a new report reckons that the switch to EVs will cost hundreds of thousands of jobs in Germany:

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The switch to electromobility could result in serious job losses in Germany’s auto industry, a new study has found.

In the production of engines and gearboxes alone, up to 88,000 jobs could be cut, according to research by the National Platform Future of Mobility (NPM) for the German government, reported newspaper Handelsblatt on Monday.

In total, the NPM working group, chaired by the head of union IG Metall Jörg Hofmann, believes 410,000 jobs are at risk of being slashed in Germany by the end of the decade.

The results of the report are to be presented on Monday, two days before a car summit.

https://www.thelocal.de/20200113/rise-of-e-mobility-in-germany-puts-400000-jobs-at-risk-electric-cars 

The car industry believes this figure is overstated, but it seems likely that job losses will still be massive either way.

Of course, if new technology proves to be cheaper and better, job losses cannot, and should not, be avoided. However, the move to electric cars is not market driven but government enforced.

It is also likely that many jobs will simply be lost to Asian manufacturers, who currently are behind Germany in technology.

Many more jobs will also be lost in oil refineries and associated sectors.

And in other news from Germany, Siemens have told Greta to get lost:

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https://www.livemint.com/companies/news/siemens-snubs-greta-thunberg-s-appeal-says-will-honor-adani-coal-mine-contract-11578874542177.html

 

 

Finally Germany is resisting a plan to provide more money for the EU’s climate policies:

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The German government is resisting a plea by Brussels to provide more funding to get the EU‘s flagship climate change policy off the ground – in a blow the continent’s decarbonisation hopes.

Commission president Ursula von der Leyen on Tuesday unveiled details of the bloc’s ambitious €1 trillion Green Deal, alongside a call for additional funds for the EU budget to make it happen.

But Germany’s finance ministry has already started the year by rejecting calls for more funding, stating that the current EU budget is sufficient to meet the continent’s climate goal of going carbon neutral by 2050.

https://www.independent.co.uk/news/world/europe/germany-climate-change-emergency-money-eu-latest-a9284876.html

 

 

All of these news items have one thing in common – economics.

Gradually it is dawning on people that the cost of climate policies, so far hidden away, will be immense.

In the words of Bachman-Turner Overdrive- You ain’t seen nothing yet!

37 Comments
  1. Ian Magness permalink
    January 16, 2020 3:27 pm

    A couple of points arising Paul:
    1) re the APD tax, like many virtue-signalling taxes, when some political superhero dreamt it up, there was much talk of the money going into a separate pool to finance something planet-saving or other. Reality? It just goes into the national tax pot to be wasted both here and overseas. Nor does it have any effect on our climate – all we do is make ourselves less competitive on the world stage. Brilliant strategy;
    2) Re EVs and hybrids; I know of a case where a punter paid a large fortune to buy a big hybrid 4×4 (and, no, not a Roller, Bentley, Range Rover or similar – standard commercial brand). The battery went. Replacement cost for this 6 foot long (yes, 6 foot) high-tec power unit? A cool £21,000. What this sort of thing will do the auto industry is anyone’s guess but it must surely lower second-hand prices to close to zero and hugely increase lease costs within a normal life for such a battery. Whatever technology we end up with, this cannot be it and yet our lords and masters think we should go full speed ahead on it.
    Mad world.

    • January 16, 2020 6:38 pm

      Anyone who wants an EV should lease it. Buying one is a mug’s game.

    • Rowland P permalink
      January 17, 2020 11:07 am

      Metalectrique.com with its development of aluminium/air fuel cells is the way to go.

    • Gerry, England permalink
      January 17, 2020 1:49 pm

      Will battery cars become like battery drills? Once the battery dies it is cheaper and easier to buy a new drill.

  2. Broadlands permalink
    January 16, 2020 3:28 pm

    “Greenpeace UK’s chief scientist, Doug Parr, said: “The government cannot claim to be a global leader on tackling the climate emergency one day, then making the most carbon-intensive kind of travel cheaper the next.”

    What climate emergency Doug? It doesn’t make sense that rapidly reducing the use of petroleum products can possibly lower the CO2 already in the atmosphere to tackle, mitigate, and prevent a climate emergency. It doesn’t work that way Doug.

    • Phoenix44 permalink
      January 17, 2020 9:37 am

      More to the point, flybe needs more passengers per flight not more flights. Adding five extra passengers will add virtually no additional CO2 to a flight’s emissions. And if it takes three cars journeys off the road, there will be a net reduction in emissions.

  3. richardw permalink
    January 16, 2020 3:44 pm

    Is it too much to hope that the govt will also review the impact carbon taxes have on the viability of energy intensive industries such as steel? Probably.

    • tonyb permalink
      January 16, 2020 4:33 pm

      Flybe has a main base at Exeter airport which is very near me. Exeter is my favourite airport. So why haven’t I used the airline for at least 6 years? A former CE of flybe decided to be environmentally friendly and therefore bought a fleet of planes of the type that can be seen in the photo.

      people actually laugh and take photos when boarding as they thought prop engine aircraft went out with Biggles..

      The net result is that the planes carry very limited numbers of passengers and take an age to get to its destination so involves a slow turn round. The end result being fantastically expensive fares often 5 times the cost of easy jet operating from bristol.

      Its far too expensive to even consider, for flights outside the UK.

      No doubt per mile flown it must be greener than jets but the customer is more intersted in cost and quickness.

      Since virgin took over I can’t say I can see any difference in costs and I guess the investment to upgrade to a fleet of grown up planes is too much.

      Can’t say I have heard much locally about the relative greenness of fybe so I don’t think it is used much as a selling point.

      The green mep lives in bristol which is a competing airport and has no connection with the ‘real’ south west which really starts many miles further west. BTW the south west region also includes Gibraltar
      Tonyb

      • January 16, 2020 4:47 pm

        As a fellow Devonian I fly very little these days, but when I flew from Exeter to Paris the flight time seemed short and the time was of little concern. The alternative means of getting from Devon to Paris didn’t bear thinking about.

      • tonyb permalink
        January 16, 2020 4:55 pm

        Of course we mustn’t forget that the UK mep’s have to clear their Strasbourg offices out by next Thursday so what the green mep thinks is irrelevant as in a few days she will be out of work anyway.

        seems a bit of a waste of time British airways making a complaint to the eu

      • tonyb permalink
        January 16, 2020 5:01 pm

        Philip
        I generally flew to Geneva or salzburg and the slowness of the planes adds a lot to the time for these routes

        I could accept the extra time if the prices were reasonable and notice that you didn’t mention this aspect.mind you the prices started shooting up beyond our comfort zone some years ago so perhaps you travelled to Paris when prices were more reasonable.

        Someone made the point about the cost and inconvenience of UK train travel and in that respect flybe are a clear winner

      • Steve permalink
        January 16, 2020 5:36 pm

        I used to fly from Exeter to Jersey in a Dakota.
        Unfortunately, Boris is about to sign the May II agreement which ties us to following EU rules for at least a year. It will be interesting to see whether we can ignore them to cut the flying tax.

      • Phoenix44 permalink
        January 17, 2020 9:44 am

        It wasn’t “Green”, it was fuel costs. And they are not much slower, but much cheaper for lower numbers of passengers. Turnaround time is completely unaffected. They are cheaper to buy or lease than an A320 or B737 so having one fewer flight a day does not affect ticket prices.

        Flybe’s routes do not support the larger aircraft, that’s why flybe can fly them. But having a route that only supports 40 passengers rather than 140 is always going to mean much higher ticket prices. Believe it or not, people in airlines can do sums.

      • Dan permalink
        January 17, 2020 2:20 pm

        @Steve

        The tax is entirely within the control of the current UK government, and still will be. The government can cut the APD taxes now. There is nothing to “ignore”

      • tonyb permalink
        January 17, 2020 8:56 pm

        Phoenix
        If all airlines could do their sums flybe would not be on their second bail out in a year and bmi and Thompson would not have colapsed.

        Flybe fly small slow planes which means ticket prices are too high,not enough people can therefore use the airlines and to compound problems journeys take too long.

        these planes were touted as being green at the time but I don’t think that had much appeal to passengers who are not willing to pay a premium and use easy jet instead.

  4. January 16, 2020 4:40 pm

    Well, I’m a train fanatic and hate flying, despite being an aircraft engineer in my previous life. However, I checked, and the point is made. Train from Southampton to Glasgow is 7 hours with one change at £188. Flight is 1 hour 15 minutes direct at £120 – that includes hand luggage. Even with taxes, the flight wins. I never thought I’d ever write this but, for once, the government has done the right thing in saving FlyBe. And I’m really laughing at the greenies who are jumping up and down in horror while, at this very moment, the Philippines volcano is spewing out more CO2 and SO2 than they could ever imagine.

    • Colin MacDonald permalink
      January 16, 2020 5:32 pm

      Of course this cost disadvantage is mentioned in the Guardian article, which goes on to lambast underinvestment in railways and “subsidies” for aviation. It’s all well and good to argue for affordable fast rail travel but nevertheless rail is subsidised while planes are taxed, though the misleading Guardian suggests the opposite.

    • John, Uk permalink
      January 16, 2020 7:27 pm

      In 30secs via the trainline i can pick out southhampton to glasgow advance fare 2 changes, 6hr 59mn at £58 without a railcard. If you are booking last minute yes it is very expensive but it can also be quite reasonable with a minimum of research

      • January 17, 2020 7:53 am

        We’re going to Manchester next week for a funeral by air from Devon. We wouldn’t be able to do it in a day by train, and certainly at necessary short notice, nowhere near the cost of flying.

  5. January 16, 2020 4:44 pm

    Dellers is his usual robust self about the air passenger duty:
    https://www.breitbart.com/europe/2020/01/16/eco-loons-spit-bile-brexiteers-cheer-as-boris-bails-out-flybe/

  6. johnbuk permalink
    January 16, 2020 5:25 pm

    Hope they’ve increased the number of train carriages going to Glasgow later this year as the queue will be horrendous. Dame Emma, Lord Elton and St Greta can’t be inconvenienced as well as the thousands of important dignitaries from around the world.

  7. Colin MacDonald permalink
    January 16, 2020 5:38 pm

    Short haul turboprops are actually quite efficient when compared with cars just travelling with a driver on board. Given the expense of rail a lot of these Flybe flights carry passengers who would otherwise drive, if Flybe ceased to be it’s quite likely most of it’s passengers would just drive and CO2 emissions rise. Of course nobody expects the Greenies to think these things through.

    • January 17, 2020 8:40 am

      That was my first thought. Even in a business like mine (which is environmental), you’d fly first and then if you won the contract – everything would be supplied by truck. It IS the most efficient way – and the environmental solutions installed would pay back our ‘carbon footprint’ many times over as well as pay others back too. I’ve lost count of the people (usually retired or semi-retired grey haired Guardian readers) who have castigated me for my point of view – but what precisely do they expect the next generation to do to make an income in the Brexit world we are about to enter? Protest for a living?

    • Gerry, England permalink
      January 17, 2020 1:51 pm

      ‘greenies’ and ‘think’ – not often you see those two words connected.

    • Dave Ward permalink
      January 17, 2020 4:27 pm

      Flybe had been operating quite a few Embraer Regional Jets, but handed them back to the leasing company last year, allegedly to save money. And consider that pure jets are generally less efficient at low/medium altitudes, so the speed advantage for short hops is rather lost over the turboprop Dash 8 / Q400 if they have to waste some of it climbing to greater flight levels. Jets* typically also need longer runways, than many small airports have. Turboprops can also (in some circumstances) reverse on their own, thereby saving the cost of tugs for “pushback”, and speeding turnaround times.

      * Yes, I know the BAe 146 had STOL capabilities, but there aren’t many of them still flying these days…

  8. dennisambler permalink
    January 16, 2020 6:10 pm

    This is the Greenpeace manifesto for their UK Fantasy Island: https://www.greenpeace.org.uk/wp-content/uploads/2019/08/0861_GP_ClimateEmergency_Report_Pages.pdf

    Fantasy Island
    https://www.imdb.com/title/tt0077008/
    “Accounts of visitors to a unique resort island in the Pacific Ocean that can fulfill literally any fantasy requested, but rarely turn out as expected.”

    • jack broughton permalink
      January 17, 2020 6:03 pm

      The Greenpeace document would be funny if it were not so dangerous. Absolute drivel pretending to be factual. I’d say that every claim in it has been demolished on this site already.

  9. subseaeng permalink
    January 16, 2020 8:31 pm

    Possibly not the correct area in which to place this but have you seen what the BBC are planning? “Our Planet Matters: What’s the BBC plan all about?” https://www.bbc.com/news/world-51104776

    • Mack permalink
      January 17, 2020 8:40 am

      Indeed, much hilarity had in the Mack household last night as the BBC 10 O’Clock News kicked off with a report of impending climeageddon due to man’s carbon sins. Plenty of fire and brimstone and biblical floods on offer although I might have missed the plagues of frogs and locusts. Particularly enjoyed the promise of the UK’s impending lurch into a Mediterranean climate. Em, might have heard that one before. Didn’t the Met Office promise us that years ago? Well, bring it on, is all I can say. Having just endured one of the wettest and coolest summers in 30 years in my part of God’s own country, and we haven’t been blessed with many recognisable summers at all in the last decade, I look forward to dusting off the old mankini and starting work on the outside swimming pool pronto.

  10. Ian Cook permalink
    January 17, 2020 8:39 am

    News for the aggressive, destructive Left; your unwoke are awakening.

  11. sensescaper permalink
    January 17, 2020 8:49 am

    Britain’s ability to pull together and make a dent commercially on the world’s stage is now paramount. That = mobilising people. News for the fools who think this is not important: When was the last time you saw anyone get an MBE or grow rich glueing themselves to buildings? Come on – grow up. Pollution can be remediated and air can be cleaned. It’s far more important that we enable trade and commerce than prioritise holiday travel. And the hypocrites in the green party? The ones who travelled on holiday and to conferences to spout off last year? Did they go my sail boat like Greta? Nope – they flew – and the media (quite rightly) hung them out to dry over their two-faced stance. We are commercial world solution providers on the morning of 30th January 2020. You do whatever it takes to support that – or prepare to see your grandchildren drown in a third-world country.

  12. Ivan permalink
    January 17, 2020 11:42 am

    The Greeks used to keep rescuing Olympic AIrways, because of course you couldn’t lose the services it provided, even though everyone knew it was a terrible airline. Eventually they had no money left to prop it up again, and had to let it fail. They discovered that actually made things better. There are Other Airlines and they aren’t so awful. Some of them are even Greek. Aviation flourishes when you let an inefficient and loss-making supplier fall out of the market. More of the routes become commericial and can operate without support. And you can subsidise essential uncommercial routes, eg to remote small islands, for a lot less than the cost of propping up a failing airline.

    If the Italians saw sense, they’d have let Alitalia fail years ago, but they have kept on rescuing it too. Both countries were repeatedly skewered in the courts over the rescues, but the rescue was fait accompli by then. The British government were often the loudest critics of the Alitalia and Olympic Airways rescues. It’s no surprise both BA and Ryanair have gone screaming to court this time.

    The Newquay-London service is subsidised because we want it to exist for social reasons, and it isn’t commericial. If Flybe falls over, it will be re-tendered and someone else will supply it. As for other routes that Flybe currently supplies, those that are commercial, doubtless some are, someone else will come in and supply them. Those that aren’t, the government can decide whether it is worth subsidising them on social grounds.

  13. Coeur de Lion permalink
    January 17, 2020 11:47 am

    Is this the beginning of the realists’ pushback? I don’t believe the BBC can go on frightening little children all the way to COP26 at Glasgow. (20,000 delegates. No doubt Guinea will field over 400 again. What a farce). The intensity of their coverage will be counter productive in the end. I must Complain again. It’s quite easy – always ask for a reply.

  14. Gerry, England permalink
    January 17, 2020 2:04 pm

    Battery cars managed not to even got a whole of one percent of UK sales last year despite all the claims about huge increases in sales, which of course only talked about percentage increase in their own class. Yeah, selling 4 of something instead of 2 is a nice increase unless the overall market is for thousands. So a whole 0.7% sold last year.

  15. Phil permalink
    January 17, 2020 2:34 pm

    Someone touched on it above, but it’s worth repeating … try getting from Southampton to Glasgow by train in a couple of hours! Let alone getting back the same day. In addition, Flybe fulfills an important social need. Without its London to Newquay service, how would the metropolitan luvvies reach their holiday homes in Rock? By bus?

    • Ivan permalink
      January 20, 2020 11:54 am

      Q: How will you get from London to Newquay without Flybe?
      A: On a different airline. The government has decided to subsidise this route and will secure another airline to provide it.

      Q: How will you get from Southampton to Glasgow in 2 hours without Flybe?
      A: Why do you think you should be able to? Southampton isn’t so very far from Heathrow and Gatwick Airports, so it is hardly badly connected and needing subsidy to keep it well connected. My expectation is that some of the Flybe network is commercial and will be offered in due course by another airline. Currently Glasgow is the 3rd most popular destination from Southampton after Amsterdam and Manchester, so it could be quite high up the list.

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