It is seldom that the Aviation Club members are stunned. That was the situation at the Institute of Directors last week when the guest speaker, British Airways chairman Martin Broughton, reported that the chancellor, Gordon Brown, had announced earlier in the morning a doubling of the Airline Passenger Duty (APD).
To take a family of four on holiday by air will now cost a minimum of ”40 ($79) in taxes alone. Clearly the Chancellor is not looking forward towards the next election. Already suffering from high costs, travel in business class cabin from the UK is likely to be left in the domain of civil servants, and the banking and law fraternity. No budget-conscious commercial company is likely to pay these charges when the airline segment of the outbound flight would normally be considerably less. From 1 February ADP will now be ”80 ($157) per person in business class long haul!
Mr Broughton summed up the issue: ”These increases are highly regrettable,” he said in a diplomatic manner but then had a dig at the mandarins. ”The civil servants will be OK.
”Air Passenger Duty is an extremely blunt instrument that provides the Treasury with extra funds for general public expenditure without any benefit to the environment whatsoever.
”Further taxing hard-working families and British businesses is not the way to address climate change. Unlike other transport sectors, UK aviation pays for all its own infrastructure and security. This hike in Air Passenger Duty is revenue-raising pure and simple with aviation being treated as a cash-cow.”
The Chancellor has clearly employed his spin doctors for his statement, saying that transport contributes 30% of emissions in the UK, and then noting that the air transport element is one-fifth. The Stern report, as quoted by Mr Broughton, says that worldwide aviation currently produces 1.6% of greenhouse gas emissions, somewhat less then the headline figure.
It could be argued that the new taxes have been brought upon British Airways and the airline community by a lack of attention to what is going on in Whitehall. In more recent times BA has become completely re-active rather than pro-active. During the reign of Lord King any inkling of government policy not in the airline”s interest meant a visit by the chairman to 10 Downing Street. The airline lobbied effectively in Westminster to ensure its voice was heard. Press and media relations were considered part of the active commercial operation. BA was aggressive in this area, perhaps too aggressive. News flowed. It worked in terms of selling seats, keeping staff moral at a high and gaining the government”s ear. Clearly sorting out the pension obligation is vital for the airline”s future but the passengers need attracting too and, as this tax has shown, the government of the day requires proper briefing. Much emphasis has been placed on communicating to the so-called analysts, but they do not sell any seats and they certainly have no influence regarding The Treasury.
The Civil Aviation Authority made a proposal last week to raise charges at the airport by inflation plus 4-8% each year between 2008 and 2013. BA, and the other airlines, are not happy about that either, the two costs added together making LHR very expensive for airlines, and ultimately passengers. Currently the airport charge is ”7.83 ($15.4), as against ”4.65 ($9.1) at Gatwick and ”5.64 ($11) at Stansted. Any Gatwick increase would be capped but under the proposal Stansted can charge what it likes.
British Airways general manager airport policy Paul Ellis said: ”Airport charges will increase by 50% during the current five-year charging period, yet passengers have yet to see an improvement in facilities and service. To advocate another 50% over the next five years cannot be justified.” The airport justifies the increase with the introduction of T5 and the central area project, ultimately of great benefit to airlines and their customers, but disruptive in the meantime.
It does seem all gloom. This country led with industrial revolution, with trains, shipbuilding and commercial aviation. Whilst Heathrow still reigns supreme in terms of international airports Amsterdam, Frankfurt and Paris will gleefully take on board this information. Commercially LHR is the lifeblood of the country. Destroy that and you have real problems. The Pound at two to the Dollar will not help.
There is a saying regarding the goose that lays the golden egg. Heathrow is that goose. Kill it and you lose the golden egg. Maybe the chancellor should visit T5.