Cheapflights’ John Barrington-Carver writes: The last Government not only bequeathed the UK its largest ever national debt but also two other bequests which have serious repercussions for the UK and its travel industry namely: the London 2012 Olympics and the highest passenger tax on air travel in the world (APD).
The UK Travel Weekly magazine writes that: “Inbound tour operators have reported a dramatic 95 per cent downturn in bookings for the period during next year’s London Olympics.” The research was carried out by the European Tour Operators Association (ETOA), among 38 of its leading members which are responsible for two million tourists a year and represent more than £2 billion in incoming revenue to the UK economy. Some members are apparently saying that sales are practically non-existent for August 2012. ETOA executive director Tom Jenkins is quoted as saying: “London will suffer financially, as has been experienced by previous host cities.” According to Jonathan Callow, managing director of Incentive World Travel, who has followed travellers’ behaviour over the past five Olympiads, tourists and business travellers will stay away from London in droves during the Olympics. Reported ramped up hotel prices for the Olympics in 2012, high APD and 20 per cent VAT are all disincentives to come to the UK. Thus the reports from ETOA travel agencies certainly seem to bear these predictions out.
Reporting on the first day of the World Travel Market (WTM) event in London this week Travel Weekly also writes that Jeremy Hunt, the Secretary of State for Culture, Olympics, Media and Sport, reacting to industry criticism about the negative effects of APD, said it is “not the time” to go to the Treasury to ask for a reduction in Air Passenger Duty. Hunt added: “We are trying to put the UK’s economy and finances back into shape. This is not the time to introduce measures that could introduce costs to the economy.”
“Costs to the economy” is an interesting choice of words. What it clearly means is “costs to the Treasury” which has already estimated that APD may fall short of its estimated annual revenue by £500 million pounds this year. It is arguable that the shortfall, and therefore a “cost to the Treasury”, is because the duty is already too high and a deterrent to travel to and from the UK by tourists and business people. That is where a true “cost to the economy” actually lies in lost overseas earnings and business opportunities.
APD is also an avoidable tax – long-haul passengers from the UK can use the Eurostar or pay the lower short-haul duty to get to European airports hubs, thus avoiding the highest band mid and long-haul APD rates. A person flying to Australia can save APD of up to £158 by flying Economy to Europe and then Business Class from there on. Indeed until just recently air passengers in Northern Ireland have been crossing over to Dublin Airport (where the Irish passenger tax has been abandoned) and using Dublin to fly long haul. Furthermore Continental Airlines threatened to pull its transatlantic flights from Belfast because of APD. Faced with the prospect of loss of trans-Atlantic connectivity from Belfast and heralded by an almost deafening silence from the Government, APD from Belfast to the US has been cut back to the short-haul level of £12 instead of the normal Band B £60 for economy seats. Unsurprisingly, other regional airports are now demanding the same treatment. The Dutch sensibly dropped their version of APD rather than raise it as it cost their economy more than it produced and was sending passengers across its borders to avoid the tax as Northern Ireland also discovered.
It is not only in the UK that opposition to APD is evident. A letter to the Chancellor this week from the US Air Transport Associations representing 30 major US aviation and travel entities makes it very clear that the 10 per cent increase in APD expected on 29 November is not only causing concern, but is damaging the UK economy: “A 225 per cent increase in taxes since 2006 clearly impacts the propensity of individuals to travel by air, as has been evidenced by the well-documented decrease in traffic from UK airports, particularly when compared to other EU airports.”
The letter continues: “Not only do the high APD tax levels affect the travel decisions of U.K. travellers, they also affect the decisions of potential travellers to the UK. For example, a family of four from Florida considering vacationing in the UK would be faced with total APD taxes of about $419 at current exchange rates (up from $129 in 2006). Such a high tax amount clearly makes the UK a less desirable destination, ultimately depriving the UK economy of the substantial benefits that international visitors provide.”
For the full US ATA text visit www.airlines.org.
(Image: Matt From London)Oonagh Shiel