Air passenger duty is an extremely costly thing for airlines operating within the UK. The tax charged per passenger on a flight could mean the UK misses out on 66 potential routes. This is because the UK APD tax rate is one of the highest.
What Is Air Passenger Duty?
Air Passenger Duty is the tax which applies to every which departs from a UK airport. This varies from £13 for a Ryanair Passenger flying to Dublin, to £156 for a business class passenger flying to New York. Typically there are four rates of air passenger duty applied to commercial flights. Firstly, the rate depends on the flight’s destination. If the capital city of the destination country is less than 2,000 miles from London, then the flight is considered a band A flight. In contrast, if the distance is over 2,000 miles then the flight is considered to be in Band B. Secondly, the class of travel also affects the rate. The lowest class of travel attracts the reduced rate if the seat pitch is less than 40 inches. In all other instances, the standard rate will apply.
|Reduced Rate||Standard Rate|
The situation is slightly different in Northen Ireland, where direct flights to Band B countries are exempt from APD.
Costly For Airlines
The air passenger duty system is extremely costly for airlines. Let’s look at a couple of examples. Ryanair is usually losing money on its cheapest fares based on APD alone. This is before other factors such as fuel and crew costs are even considered. The cheapest Ryanair flights sell for between £8-12. Now if a passenger doesn’t compliment this by paying for extras, Ryanair is having to pay the difference between the fare and the cost of operating the flight.
Now let us take a look at a fully loaded British Airways A380 flying from London to Los Angeles. The aircraft has a capacity for 469 passengers spread across 4 classes. Shockingly, each time a fully loaded A380 departs the UK, the airline has to hand over £52,186 to the British Government.
In fact, some airlines are openly admitting that British APD is the reason for reduced services. Norwegian announced plans to cut its Edinburgh to New York stating: “the decision to discontinue service between the United States and Edinburgh was tied to the Scottish government’s decision to postpone a 50 per cent reduction in air passenger taxes.”
Damaging To UK Industry?
A report released by Frontier Economics found that 66 potential routes from the UK would be more commercially viable if the UK were to scrap APD. Airlines UK, the group that commisioned the study, claimed that the £3.4 billion collected in APD each year was equal to the total airport earnings direct from airlines across the whole of the UK. While this may not seem like a hugely significant issue, the CEO of IAG believes the opposite. He explained the reason that Level, IAG’s new low-cost airline, was not in the UK was that of APD. UK hubs such as Manchester, Cardiff, Birmingham, and Edinburgh are “not financially viable” as a result of APD.
Commenting on Air Passenger Duty, Treasury minister Robert Jenrick, made suggestions that APD could be cut following Brexit. According to The Telegraph, the minister commented “as we leave the European Union that could change and the Treasury will keep that under consideration”
What do you make of Air Passenger Duty? Should it be abolished, or should things stay the way they are? Let us know below!