Editor's column by Louise Driscoll

Air Passenger Duty: why the tax on UK air travel won’t stop us from flying

The UK's controversial Air Passenger Duty (APD) has been in the spotlight again this week, after rising 8 percent. Louise Driscoll looks at why this tax won't stop most of us from flying.

From planes to pasties – there seems to be no let up from the British government in taxing us for every other ‘luxury’.

On April 1 an eight percent hike in Air Passenger Duty (APD) was added to the cost of flights taking off from UK airports – a move condemned by the travel industry as bad for British travellers, tourism and business.

The Airport Departure Tax has even united the bosses of four of Britain’s biggest rival airlines – British Airways, Virgin, easyJet and Ryanair. They point out that Brits are paying the highest air travel tax in Europe and believe the latest rise will have damaging repercussions for tourism.

But is it as bad for Brits as we’re being led to believe?

We need to look at the bigger picture.

Overall, APD hits those on lower incomes hardest – the most price-sensitive travellers who might fly with airlines like Ryanair or easyJet.

But relatively speaking, the latest APD hike is not as eye watering as some news headlines might have you believe.

For example, if you’re booking a short-haul flight from the UK in Economy, the impact on your ticket is negligible – up by £1 to £13.

Families travelling together will naturally see a bigger increase in their ticket prices – but the impact isn’t substantial when we’ve become used to paying high APD.

A family of four flying from the UK to Florida in Economy will now pay £260 in APD – (£65 each) or £368 to Australia (£92 each): a £5 and £7 per head increase respectively.

We can’t ignore that APD has become a bigger slice of the revenue pie for the government and is not the ‘green’ tax it was intended to be when introduced by Kenneth Clarke in 1994.

Instead it’s being raised to plug the government’s deficit – and is expected to generate £3.5 billion by 2016.

But if you thought this tax on flying was bad, you should see how much we’re paying for our tickets in fuel surcharges.

Fuel Surcharges

High oil prices have led airlines to offset their fuel costs by adding huge surcharges – a trend that shows no sign of reversing.

Punching in travel dates in June from London to New York on BA’s website, I find a £463 return fare, of which £65 is made up of air passenger duty and a whopping £213 is the fuel surcharge.

And worryingly, fuel surcharges are expected to keep rising as airlines react to the European Union’s Emissions Trading Scheme (ETS) by hiking ticket prices to reflect the price of carbon credits they will have to pay from 2013.

While the impact of the ETS on our ticket prices will not be huge – it not only weakens the case for APD as a ‘green’ tax but adds to the general rise we’re seeing in airfares.

In the long-term, these cost increases collectively are more likely to affect the number of times we fly.

But we should also consider other factors that influence our travel habits. APD and fuel surcharges alone are not going to stop us from flying.

Exchange rates have a huge influence on where we travel and how often – as we seek value-for-money holidays and to make our pound travel further.

After holidaying in Australia where the dollar is the strongest it’s ever been against the pound (and being forced to pay three times what I’d pay in London to eat out), the exorbitant prices have put me off returning there until the exchange rates improve.

Airline fees and competition from airlines on certain routes is also likely to influence our purchasing habits one way or another.

Fortunately the UK still has a highly competitive airline market – and as long as we have plenty of options to fly with, that will continue to spur lower fares (of which airlines will pocket less).

Perhaps the most frustrating aspect of APD is that it’s just a pure tax.

If the government had set aside a portion of it for green initiatives – which it hasn’t – then perhaps it would be more justified. After all, we should be taking some responsibility for the impact of our emissions on the planet (and not just in Europe).

Even if APD was called a green tax – which I argue it isn’t – it isn’t a fair tax.

The ‘band’ system is designed so that you pay more duty the further you fly, but that is not always the case.

It makes no logical sense why passengers are paying £81 in APD to fly to the Caribbean but £65 to fly to other US destinations that are much further away from the UK, such as Hawaii.

Another problem with APD is that travellers who choose a few inches of extra legroom in Premium Economy must pay the same duty as those sprawling out in flat beds in Business or First Class.

And that figure is typically double what you’d pay in Economy.

So Premium Economy passengers travelling from the UK to Singapore or Australia will pay £184 in APD compared to £92 in Economy. Yet those sitting at the front of the plane will pay the same APD.

Booking Economy flights is one way to reduce the amount of APD you pay.

Going the long way around

The other solution is to bypass the UK and join the growing number of travellers making their own way to northern European airports to connect with long-haul flights.

But it’s unnecessarily creating more emissions – and can be a logistical nightmare if you’re booking two separate tickets and your flight to say Amsterdam or Frankfurt is delayed, causing you to miss your onward flight.

The rules say that you won’t get a refund on your onward flight – even if you’re travelling on the same airline because you’ve booked separate tickets.

If you’re flying long-haul from the UK, there is one way to reduce how much you pay in APD, by choosing a stopover en route for longer than 24 hours.

If you’re flying from London to Melbourne for example, you could stop in Dubai on the way.

Leave a gap of more than 24 hours and you’re not considered to be a connecting passenger for APD purposes – so you’ll just pay the APD from London to Dubai and not to Australia. You’ll save £27 in tax (but realistically you’ll probably blow that much on a few drinks in Dubai).

However much we hate the tax – APD is here to stay and it’s increasing again in 2013.

What’s almost certain is it won’t stop most of us from taking to the skies, not yet anyway.

Louise

What others have said

  1. @Frank: It would affect them most likely since unlike income tax there’s a set price for it, so families with lesser disposable income would be ‘hit hardest’.

    What bothers me most about it is the suggestion it could rise over the next few years. My family live all over the world and flying is becoming so expensive now that I’m unsure if I’ll be able to continually see them all each year.

    Expensive times ahead it seems.

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