12 December 2022, etc.venues Monument, London
Business Travel Show Europe, presented by The BTN
21 November, London Hilton Metropole
Three new areas of regulation look set to make a significant impact on the industry in 2012
WE ARE SUPPOSED TO be living in a new world where the regulation of business sectors is to be diluted rather than enhanced, with the idea of reducing red tape. However, 2012 is likely to see three significant areas of new or revised regulations affecting the travel sector, which will inevitably impact on business travel.
Despite extensive lobbying by leading industry figures, George Osborne in his Autumn Statement was left unmoved and air passenger duty (APD) will see a significant rise from April 1, 2012. The indication is that APD will rise at twice the rate of infl ation, and be in the region of 10 per cent. The increase has faced disapproval from the airline sector, ABTA, and the UK tourism industry.
The duty will be extended to flights on business jets, and spokespeople for key airlines suggest the tax is unfair and will damage the UK's economic recovery. On December 6, 2011, the Treasury published its response to the APD consultation.
This dismissed any changes to the current bands as being too complicated and costly. There is to be no change to premium economy seats, which had been thought could be re-banded in the higher rate.
For the business traveller, corporate buyer and TMC, it has been pointed out that considerable savings on fares can be achieved by paying the APD on the sector leaving the UK for another continental hub, and for the international journey to commence from the European hub onwards where APD will not be levied. In view of the significant savings that this might achieve, buyers and TMC's may need to revisit travel policy as flying with their approved carriers might result in higher fares if the tax is included. For those reviewing travel budgets, the impact of APD will be a significant factor from next April. APD is also to be retrospective - passengers due to travel after April 1, who have already booked and paid the present level of APD, may well be asked for the amount of the increase by their airlines before they travel.
The European Union's (EU) emissions trading scheme (ETS) will inevitably impact upon the price of fares, and many foreign-based airlines object strongly to the principle that all airlines fl ying to and from European airports are obliged to subscribe. This led to the International Civil Aviation Organisation (ICAO) producing a resolution calling on the EU to rethink the tax, particularly for non-EU airlines. Several US and Canadian carriers and airline associations challenged the ETS in the English High Court.
The European Advocate General has also given his opinion, which indicates that the EU is entitled to act unilaterally in a way which will bind foreign airlines to prevent "an unjustified competitive advantage over their European competitors" if non-EU carriers were excluded from ETS. While the campaign to reduce or scrap this new tax continues, it is a further regulatory and cost pressure on the price of airline tickets.
In my last Buying Business Travel contribution, under the proposed wording of the draft new Air Travel Organisers' Licensing (ATOL) regulations, it appeared that corporate travel was to be included. During November 2011, the Department for Transport (DfT) produced a paper on possible changes to the draft reforms due to be introduced on April 1. While this suggested "the main purpose of the proposed reforms is to protect consumers who buy Flight Plus holidays, rather than businesses", the DfT has indicated it will consider options as to how this might be achieved. The indication is that the DfT is planning to introduce an exemption to ATOL, to exclude flight only and flight-plus sales made to a corporate entity. The suggestion is the exemption would refer to sales of products made to a limited company or limited liability partnership, but would exclude, for example, sales to charities or sole traders.
An ATOL will still be required for business package sales that include a flight. The latest information from the DfT does not accept the travel trade's suggestion that ATOL protection apply only to individuals and that sales to corporates and similar entities be excluded.
The timeline for the introduction for the new APD provisions and ATOL reform is approaching rapidly. If those involved in the consultation process are unable to change the minds of the regulators, the first three months of this year will require all businesses involved in the provision of business travel to review their pricing models and operational structures. It will be necessary to review contracts with business partners and with suppliers, to tighten up agency agreements, to ensure proper collection and compliance, and to ensure that all back office systems can manage the changes in sufficient time before these regulations are introduced.
All stakeholders involved in the process of these consultations are disappointed that these regulations are arriving together and at very short notice. The industry should follow these developments carefully and consider how they might affect their business operations.