easyJet back Government's new plane tax
29.06.08
easyJet will break ranks with Britain's airlines tomorrow announce its 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, easyJet will urge the Government to ignore protests from British Airways, the US Government and cargo airlines, and push ahead with plans to replace the current tax on passengers with one on aircraft. The Telegraph 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.’ [If we were shareholders, I'm not sure that we would agree that this is a good use of the airline's money in the current economic climate.]
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 plans have outraged most airlines because it will increase the tax on passengers, and therefore the cost of flights.
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' in implementing the tax, with suggestions that it is already too late for an October announcement
However, the Government has already signalled that it expects to raise 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% of flights coming through Heathrow, arguing that the new tax will make UK airlines uncompetitive. And cargo airlines, which currently pay no APD, say 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.
However, a BA spokesman said it is 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.'
‘Less 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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