November 24, 2008: Cheapflights Ltd., a leading international flight price search and comparison site welcomed the Chancellor of the Exchequer's statement last week in which Alistair Darling stated:
"….. At a time when the economy slows down…….…trying to get more tax out of people that would make a difficult situation worse, so what you do is you support the economy by helping businesses, by helping people." 1
Cheapflights therefore looks forward with interest to the Chancellor's Monday PBR Statement when he has the opportunity not only to help the UK aviation industry, but also the millions of UK leisure and business travellers by ending Air Passenger Duty (APD).
Cheapflights, along with many companies who support a healthy aviation industry, has previously called for the abolition of Air Passenger Duty (APD). APD is not only a regressive tax, which prevents many hard-working families from travelling, it is also the only such tax in the G7.2 Doubled in 2007 when the economy was still expanding, APD puts the UK domestic airline industry at a competitive disadvantage.3 APD makes business travel from the UK more costly, putting UK companies at a disadvantage to overseas competitors.
The proposed replacement for APD, Aircraft Duty is even more damaging to the UK economy and UK aviation as it will extend the tax burden to transfer passengers, cargo flights and business jets. At a time when the UK aviation industry is facing chronic uncertainty, the proposed Aircraft Duty would increase the sector's current tax burden by a staggering £250 million a year.
Furthermore Aircraft Duty will be:
- complex to administer - and will involve significant costs involved in creating new reporting systems.
- challenged internationally in the Courts, a US Embassy letter has already expressed the "deep concern" of the US government with the proposed Aircraft Duty. It lists a number of international agreements (1944 Chicago Convention and 2007 open skies agreement) that it says would be breached by the new tax.
- an extra cost for already hard-pressed leisure and business passengers e.g. airlines estimate that under the proposed tax change, the tax payable on a flight from the UK to the US could more than double to £100 per person.
- an encouragement for Airlines to avoid British airports - they will opt instead to operate from other European airports where they will not be subject to the tax. This is far easier for airlines now the Trans-Atlantic "Open Skies" agreement is in force.
Cheapflights does however support moves to include aviation in the European Carbon Trading Scheme (CTS) when this comes into force in 2012, but only on the basis that the British economy has come out of recession by then. Whilst this will certainly increase costs for airlines, which will be likely to be passed on in part or full to passengers, it is a pan-European scheme creating a level field for airlines operating out of Europe. Furthermore there are indications that by 2012 the preferable global CTS being brokered by the International Civil Aviation Organisation (ICAO) may be in place which will address carbon emissions by international aviation on a global basis.
Cheapflights' CEO Chris Cuddy commented: "Aviation is an essential element of world trade and cultural exchange. As an island trading nation, the UK is dependent on efficient links with the rest of the world - competitive UK airlines supported by infrastructure capable of handling growth are absolutely vital to the UK especially as it faces the challenge of global recession.
With the credit crunch and collapse in consumer confidence, the Government has the opportunity to make a real difference to the health of the British economy by calling a halt to the decade long obsession with using aviation as a prime target for taxation. Taxation does not make good environmental sense and there is no rational justification for the ever-increasing taxation burden especially in view of aviation's minor (2%) global carbon footprint.2 & 4"
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Mr Cuddy added: "Should the Chancellor fail to seize the opportunity to remove the debilitating taxes on the UK aviation industry, he will create severe unemployment in the sector. Moreover, he will also undermine London's already failing position as a leading international hub; he will penalise businesses whose employees need to travel; and fail to help leisure travellers, especially those at the lower end of the income spectrum who more than anyone else are feeling the cold winds of the recession.
"With this recession upon the United Kingdom - and a potential slump for the UK airlines in particular - the Chancellor needs to make good his statement: "… what you do is you support the economy. helping businesses, by helping people"."
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Contact:
Cheapflights Ltd:
John Barrington-Carver; Corporate PR
Tel: +44 (0) 207 467 3535
Mobile +44 (0) 7831 655 630
e-mail: corporate-pr@cheapflights.com
Notes to editors
1. www.guardian.co.uk/politics/2008/nov/17
2. Introduced and then doubled at a time of economic boom, APD is a tax which does nothing to encourage airlines to be environmentally responsible. All airlines want to fly at capacity - taxing passengers discourages full planes and arguably slows airlines' ability to invest in modern fleets, especially so in the face of a recession. As IATA Director General and CEO, Giovanni Bisignani addressing the Farnborough International 2008 Sustainable Aviation Briefing said: “Taxes don’t reduce emissions. Only better operations and technology can do that.”
3. UK airlines play a major part in this positive contribution to UK GDP. The contribution of aviation to the UK economy is significant, having been assessed at over £11 billion (in 2004), with over 520,000 jobs in total dependent on aviation (Source: Oxford Economic Forecasting report October 2006). However, UK Airlines have faced a devastating past year with a number succumbing to the lethal effect of historically high fuel prices resulting in many job losses in the UK. Whilst the current collapse of crude oil prices appears positive, it still means that jet fuel costs $84.7 per barrel, down 27% year on year (Source: The Jet Fuel Price Monitor - a joint IATA - Platts initiative). But more than offsetting this Dollar price fall is the fact that the pound has collapsed against the dollar from just over 2 to the pound to 1.49, so in reality UK airlines are paying approximately 37.5% more now for fuel in Sterling than they were a year ago. UK airlines therefore still need a cut in their taxation burden to face up to the expected severe recession.
4. IPCC Research (Intergovernmental Panel on Climate Change)
Cheapflights Ltd.: www.cheapflights.co.uk was launched in 1996. It pioneered the concept of online flight price search and comparison and has been consistently profitable since launch. It was the first UK dotcom to introduce pay-per-click in 2000, which helped to transform online advertising. Cheapflights does not sell tickets but publishes flight deals from airlines, budget airlines, online travel agents and the long tail of other specialist flight deal providers. It launched its US site www.cheapflights.com in May 2003, which has rapidly grown and which now provides half of Cheapflights' millions of monthly visits by consumers. Its Canadian site www.cheapflights.ca which was "Light" launched in April 2007 is already enjoying traffic of over 250,000 monthly visits. The first non-English language site Cheapflug.de was "light" launched in Germany in October 2008. Cheapflights' main European and North American sites each provide consumers with rapid, easy to use comparisons of about one million flight deals daily from the broadest online selection of travel operators. The sites are valued by travel industry advertisers as a neutral, high-traffic source of quality high-conversion consumer leads. Cheapflights' status as an independent online travel price search and comparison and travel news site, together with its free opt-in subscriber newsletters makes it a natural starting point for finding travel deals and up-to-date travel industry information on both sides of the Atlantic.
