easyJet to back aircraft tax
29.06.08
easyJet will break ranks with the rest of Britain's airlines tomorrow and come out in support of the Government's replacement for Air Passenger Duty (APD), the Telegraph reports. But it s support could come too late for the tax, with a Government minister saying late last week that it faces problems and hinting that it may not be implemented.
According to the newspaper, the budget airline will urge the Government to ignore protests from interests as diverse as British Airways, the US Government and cargo airlines and push ahead with plans to replace the current tax on passengers with one on aircraft. It says that easyJet will support its stance with a £100,000 press advertising campaign with the strapline ‘Air tax is changing. Cut out the subsidies.’
APD is currently charged at £10-£20 for flights within Europe, depending on whether passengers are flying economy class or in first or business, rising to £40-£80 for long-haul flights. The Government is proposing to replace APD in November 2009 with a levy per flight, based on take off weight and distance to be travelled. The move has outraged most airlines because it will increase the tax take from passengers.
Details of the new tax are expected at this autumn's pre-Budget report, although Parliamentary under-secretary for transport Jim Fitzpatrick told a conference on last week: ‘Difficulties surround the decision. There are strong arguments that we should not proceed with the transition.’ The Treasury is said to be 'way behind schedule' with suggestions that it is already too late for an October announcement
The Government has already signalled that it sees an additional £500m of revenue in the first year that the tax is in place, to reach £3bn, with the amount rising thereafter. This is in addition to the carbon trading costs announced by the EU last week.
The proposed new tax has already sparked a diplomatic row, with the US Embassy in London writing to the Treasury, arguing that the proposal ‘although cast as an environmental measure, appears in reality to constitute nothing more than a device for generating additional revenue from the airline community’.
BA is lobbying for an exemption for transfer passengers, which make up 34 percent of all flights coming through Heathrow, arguing that the proposed replacement for APD will make UK airlines uncompetitive. And cargo airlines, which currently pay no APD, argue that the new tax will reduce demand for UK exports, particularly hi-tech goods, which are highly sensitive to pricing differentials.
The Telegraph says that easyJet will argue that transfer passengers, cargo carriers and long-haul operators should all pay, while those operating older aircraft should pay more - a particularly antagonistic stance towards US carriers, which generally operate older fleet.
Toby Nicol, easyJet spokesman, told the newspaper: ‘Our message to the Government is: stand up to the siren voices in the industry. For every person who gets an opt-out, a free ride or a subsidy, someone else is paying and it's not going to be our passengers.’
A BA spokesman countered, saying it was vital transfer passengers were exempted if UK airlines and Heathrow were to maintain their competitiveness. She said: ‘The effect of the proposals would be to reduce Heathrow's long-haul network because they would create a financial incentive for customers to fly via Continental hubs rather than Heathrow.'
‘Lower numbers of transfer passengers would lead to some long-haul routes becoming unviable, reducing the range of direct flights for UK customers and threatening the viability of some UK domestic services to and from Heathrow.’
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