Bloomberg News

BA, Ryanair, EasyJet and Virgin Team Up to Urge Air-Tax Cull

November 17, 2011

(Updates with CEO comments starting in second paragraph.)

Nov. 17 (Bloomberg) -- Ryanair Holdings Plc, EasyJet Plc, Virgin Atlantic Airways Ltd. and British Airways-owner IAG called on the U.K. to scrap an aviation tax they say is hurting the economy to a degree that outweighs the revenue raised.

Air Passenger Duty is discouraging tourists from visiting and raising the cost of travel for people living in the country, the four carriers said today at a press briefing. IAG Chief Executive Officer Willie Walsh added in an interview that the company could move operations elsewhere, while Ryanair CEO Michael O’Leary said the discount airline may cut U.K. seats.

Carriers currently pay APD on a per-passenger basis, with the tariff rising in four bands according to the length of the flight. A business-class passenger traveling from London within Western Europe pays 24 pounds ($38), while the tax can reach as high as 170 pounds for locations in Australia and South America.

“It is a tax on tourism and a tax on business,” the four CEOs say in a letter to U.K. Chancellor George Osborne, who will present an autumn budget statement Nov. 29 that may announce an increase in the duty, which airlines estimate generates as much as 2 billion pounds annually for the government.

‘Mobile Assets’

“We have a global business with mobile assets which we can take to other parts of the world,” said Walsh of IAG, which also owns Spain’s Iberia and has a hub in Madrid. “If the U.K. is turning away opportunities competitors are going to snap them up. ADP does not exist in the Middle East, for example, where they say ‘thanks a lot, we’re taking your business.’”

The number of passengers using U.K. airports has fallen for the past three years to a level lower than in 2004, dropping by 7.4 million in 2010, according to a statement from the airlines.

Discount and long-haul operators are putting aside their differences to fight the tax. EasyJet had previously lobbied for changing APD to a per-plane charge from a per-passenger one, favoring the fuel-efficiency of its young fleet, while Virgin had said its flights were subsidizing EasyJet’s operations.

“This is the first time the CEOs have ever sat together, which shows you how important this is for us,” Virgin CEO Steve Ridgway said at the briefing in London.

U.K. carriers also say that APD will create double taxation as they’ll also have to participate in the European Union’s emission-trading system from next year.

“The combination of ADP and ETS is unjustifiable,” EasyJet CEO Carolyn McCall said at the briefing. “ADP needs to be scrapped. It’s easy money for the government at the moment but they have to see the damage it’s doing to the economy.”

The carriers urged Osborne to commission an independent report to evaluate the effect of the aviation tax. The Dutch government scrapped a similar levy after a study showed the “harmful” impact was four times greater than garnered revenue.

--Editors: Chris Jasper, Robert Valpuesta.

To contact the reporters on this story: Sabine Pirone in London at spirone@bloomberg.net; Finbarr Flynn at fflynn3@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net


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