MIAMI – From January 1, The UK officially leaves the EU, the British government has the opportunity to treat its domestic market differently to the rest of the bloc. That means its cripplingly high Air Passenger Duty (APD) levels could no longer be applied twice on domestic flights. But with COVID creating financial hardship for airlines, many call for reform that goes deeper than that.
The news of Flybe (BE) returning to the skies as early as next year was not a shock to the system. Many of the routes that BE served are underserved or not even served at all. This means that there is still room in the UK airline matrix for a regional carrier. However, the airline will make a comeback with the same problems as before and additional due to the ongoing global crisis.
One of the biggest pressures on Flybe’s operations was the UK’s high level of Air Passenger Duty (APD). Having tax charged at both ends of the journey on domestic routes crippled the airline’s pricing strategy and was undoubtedly a contributing factor in its demise.
The Right to Abolish APD Domestically
As one of the UK’s leading domestic airlines, Loganair (LM) feels the same pressures that BE had to contend with. Speaking at this week’s Airlines 2050 conference, CEO Jonathan Hinkles commented:
“Removal of APD is something that the industry has been pushing for, for a very long time. And I think the most tangible element of that is around the removal of the double APD on domestic flights, where of course you end up getting taxed twice. That’s something that will become within the government’s power to change. It’s one of the few good things coming out of Brexit, that there is that ability to differentiate between the domestic market and the European market.”
As part of Europe, the UK has had to treat both the domestic and continental markets the same. However, from January 1, when, one way or another, Brexit will be finalized, the government has the right to abolish APD on domestic flights, but will it do so?
The Debate about Removing APD in the UK
So far, there has been no firm commitment to the scrapping of APD. In fact, the latest news from Chancellor Rishi Sunak is that APD will actually be increased in 2021. While the short-haul rate remains unchanged at £13 per person, longer flights will attract an extra £2, taking the cost to £82.
Conservative MP Henry Smith, who chairs the Air Passenger Duty Reform Group, estimates that the £3.7bn generated by the tax would be fully replaced and even exceded through additional revenue brought in from more flight connections.
Speaking last year to Airport Technology, Smith said, “As an island trading nation, and with international trade deals post-Brexit, I think that helping reduce APD so that people can travel more both for business and pleasure is something that will be good for the economy.”
It was hoped that the Government’s November Budget would be the platform from which to announce a review or at least temporary relief from APD. However, with Brexit looming, that has been pushed to 2021.
From January, the government has the opportunity to remove the double taxation on domestic flights, which would be a step in the right direction, as well as reviewing the charges for non-domestic flights. Whether that happens, we’ll just have to wait and see.
Loganair E145 G-SAJD landing into Manchester International Airport (MAN,EGCC) ©️ Jack Parker