UK airports losing out on over 60 new direct routes because of sky-high rates of Air Passenger Duty, report concludes

September 19, 2018

UK airports could be losing out on over 60 new direct routes – including 15 long-haul connections outside of London – because of current Government policy on Air Passenger Duty (APD) – a new report has found.

A study carried out by Frontier Economics – commissioned by Airlines UK, the industry association that represents 13 UK-registered carriers – looked to identify potential new connections that could receive a viability boost if the tax were abolished. It concluded that 66 new routes could be added by airlines, including:

  • 20 domestic connections
  • 31 short-haul connections (excluding the UK)
  • 15 long-haul connections outside of London

The report also found that of a sample of eight routes dropped by airlines in recent years on the grounds that they were loss making all of them could have been viable if APD had been abolished.

The purpose of the report was to describe how APD – the departure tax paid by all passengers taking off from a UK airport – impacts on airline route economics and capacity decisions. It concludes that by increasing the price of tickets for passengers, the tax dampens demand and impacts negatively on connectivity at UK airports. It highlights that:

  • APD was found to constitute as much as 50% of the price of an off-peak short-haul ticket (from UK to Poland) and 44% the price of an off-peak long-haul ticket (from UK to Israel).
  • By raising around £3.4 billion per year, APD represents around the same cost as the total aeronautical revenue (the money raised through charges paid by airlines) generated by all airports in the UK.
  • Through analysis of 2017 schedules data at the 20 largest airports in the UK, by movements, a total of 66 new direct connections could potentially be viable if APD were abolished, such as:

Domestic connections – examples include Liverpool to Southampton; Bristol to Leeds Bradford; and Edinburgh to Guernsey

Short-haul connections (excluding the UK) – examples include Belfast to Madrid; Southampton to Barcelona; and Aberdeen to Munich

Long-haul connections – examples include Bristol to Dubai; Edinburgh to Delhi; and Birmingham to Tel Aviv

Commenting on the report, Tim Alderslade, Chief Executive of Airlines UK, said:

“As we prepare to leave the European Union we should be doing everything in our power to create the conditions for economic success – and as an island nation it is hard to see how levying the highest rate of tax on air travel in the world is compatible with this goal. Airlines are in the business of responding to demand, and by increasing the price of a ticket by such an extent the Government is directly contributing to fewer connections at UK airports and lower frequency on existing services. The costs of such a counterproductive policy are there for all to see – with dozens of potential services, including long-haul connections outside of London, proving unviable under current conditions, putting a brake on the UK’s economic growth. 

“The message from this report is clear – get rid of this damaging tax once and for all and carriers will be in a position to respond in kind with more routes, greater frequency and better connectivity for the whole of the UK.”     

Johan Lundgren, Chief Executive of EasyJet, said:

“Removing Air Passenger Duty would allow airlines to provide more routes and lower fares for passengers in the UK, offering even more choice and important economic connections. This is a clear opportunity for the Government to help business all across the UK to do more business abroad.”

Craig Kreeger, Chief Executive of Virgin Atlantic, said:

“With Brexit on the horizon the UK should be working harder than ever to demonstrate it is open for business, not levying the highest rate of tax on air travel in the world. We need the Government to send a clear signal that it is serious about helping us to connect to international markets and that it sees our world-class aviation sector as a key component of the nation’s future economic success.”

Priti Patel, Member of Parliament for Witham, said:

“Britain’s high rates of Air Passenger Duty act as a barrier to economic growth and this report shows how this tax is damaging our country. When we are competing in a global market for businesses, investors and tourists to come to Britain this tax on travel puts people off and is stopping business from creating jobs. This tax needs dealing with so we can open up more trade links and travel routes to the rest of the world and attract more businesses and tourists into Britain.”

Jim Shannon, Member of Parliament for Strangford, Northern Ireland, said:

“This is yet more compelling evidence that the current high level of UK APD is damaging the overall UK economy. We’re particularly hard hit in Northern Ireland as we share a land border with a country with no equivalent aviation tax. Every extra route means more quality jobs and increased growth. Northern Ireland needs action on this tax, and so does the rest of the UK; action to boost jobs and trade. My colleagues and I will be pushing hard for this in the upcoming Budget.”  

 

The full report is available here.