COMMENT: One Increase After the Other ” When will it stop?
Last Friday a commercial time bomb was launched by BAA Plc. BAA, a one time government agency, has a monopoly of the major airports around London, and also operates the three largest airports in Scotland.
BAA has gained approval to increase its charges to airlines operating at Heathrow by 9% this year and by RPI plus 6.5% for the next four years, additional finance to help cover the cost of Terminal 5.
Sir Richard Branson summed up for the industry and not just his airline.
”This is sheer madness. At a time when fuel prices are at $40 per barrel and when BAA is still making massive profits whoever suggested that it be allowed to raise its charges to airlines by 40% must be off their heads. It begs the question who regulates the regulators”.
”We will fight this proposal tooth and nail or we”d have no choice but to pass these increases on in fares. Asking airlines and passengers to pay for investment before it is delivered is unacceptable, particularly when the supplier is a monopoly. Moreover, BAA is making ”massive profits” (according to its Chief Executive), at a time when airlines are bearing the brunt of the effects of 11 September 2001, the underlying economic downturn, and the threat of war with Iraq”.
And if that is not enough to make travellers and travel industry staff cry, rumours are strong that the government is about to further penalise the industry by doubling the so-called departure tax. The excuse this time is that they want to slow down the growth in air transport. If these stories are true either someone in the Treasury is living in their own dream world, or another personage elsewhere in the same department has decided that the travelling public can be stung for at least another ”1bn. Of course those airlines who do not refund the tax for no-shows and passengers who have cancelled will be rubbing their hands with glee. According to the Irish Times Ryanair took in E27m this way last year.
Within the UK and to the EC the current outbound tax is ”5 a seat economy and ”10 business class, with the rest at ”20 and ”40 respectively. On top of this the airline has to pay a security charge, which varies from airport to airport, and a passenger service supplement. And that”s just outbound. There are taxes to pay at the other end too. However some of the budget airlines are rumoured not to pay a passenger service supplement at certain airports. Part of a so-called community effort these are subsidised, probably in the end by the EU, which means you and me. On a BA economy ticket to Paris you will pay ”28.50 in fees over and above the price the carrier charges.
The doubling of the departure tax will not slow down the growth in air transport around the world. It may well kill off some British airlines who are finding the whole aviation business a real struggle at the present time, and put even more pressure on the survivors.
What it will do is make the United Kingdom Ltd far less attractive to foreign visitors at a time when the whole of the leisure industry is crying out for tourists and competition around the globe is intense.
In Britain we once had a ship building industry, which the French still have. We also built aircraft. Ditto. BA chief Rob Eddington has often said that Heathrow is in serious danger of losing its status as the world”s biggest (and most important) international airport. If these taxes (or call them what you like) are allowed to go through, in 20 years” time, just like the ships and ”planes, we could be talking about the glory that was Heathrow! The losers then are not just the airlines but also BAA and its shareholders. And UK Ltd.