Thursday, 17 November 2011

UK biggest airlines join forces

The bosses of four of the biggest airlines in the UK have put their various feuds on hold to demand that the government scrap the tax that all passengers must pay on flights departing from the UK.
The chief executives of British AirwaysVirgin AtlanticRyanair andeasyJet claimed on Thursday that air passenger duty (APD) is "incredibly damaging" to the economy.
In an unprecedented demonstration of unity in the fiercely competitive aviation industry, the bosses joined together to claim that the tax, which generates £2.2bn a year for the Treasury, is a drain on the economy because it puts tourists off visiting the UK and discourages businesses from investing in Britain.

"It is net negative for the UK economy. It's destroying jobs, it's destroying the opportunity for job creation, it's discouraging tourism and it's discouraging business investment in the UK," said Willie Walsh, chief executive of British Airways' parent company, IAG. "Critically, it's telling foreign investors to take their money and generate prosperity somewhere else. And all of this at a time when UK unemployment is at its highest level since 1996."
An economic report commissioned by the airlines found that the tax costs the UK economy £2.6bn a year and claimed it caused a 29m drop in the number of flights taken between 2007 and 2010.
Walsh said APD, which was first introduced in 1994 but rose sharply during Labour's 13 years in power, was not a tax on the airline industrybut a tax on families and businesses.
He said he was "amazed" that chancellor George Osborne was "perpetuating a failed policy" pursued by Gordon Brown in his years as chancellor and prime minister.
"This is the chancellor having a whip-round to take tax from tourists that want to fly in here, from the business person that wants to fly here to generate jobs, every family that wants to take a well-earned break – it is them that are paying, not the airlines," he said. "This is a tax that's collected by us on behalf of the chancellor. If it is scrapped it will go straight back into the pockets of the traveller."
He said the "unprecedented" alliance between himself, Michael O'Leary of Ryanair, Carolyn McCall of easyJet and Steve Ridgway of Virgin Atlantic showed how important the tax is to the industry and the economy.
"It's a critical issue that goes beyond the fierce rivalry – some might say hatred – between the four of us at this table," he said. "How often do you see four bitter rivals who are often abusive to one another sit down together and talk about these issues?"
O'Leary, the frank-speaking boss of Ryanair, who rarely sees eye-to-eye with the rest of the airline industry, said Osborne "lacks the balls" to cut the tax.
A spokesman for the Treasury said it was very unlikely that APD would be scrapped. It is expected to be increased by 10% in the next budget in April.
"The government took action by freezing air passenger duty this year," he said. "We consulted on a range of reforms to APD, including simplifying the tax and making it fairer by extending APD to private jets. We will say more on this in the coming weeks.
"It is also important to remember that the UK is not the only country with a passenger duty, and unlike many other countries the UK does not levy VAT on flights."
A spokesman for Friends of the Earth said: "Airlines already get plenty of tax breaks – they don't pay any fuel duty or VAT on flights or new planes. Air passenger duty plays an important part in tackling aviation's significant impact on climate change. Ministers must stand up to this unfair lobbying."

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