Boost for British airlines and airports as domestic flight tax cut planned

Air passenger duty reduction comes as UK hosts climate summit

People queue to enter Heathrow Airport's Terminal 2, where travellers have faced waits of several hours in recent weeks. Reuters

Britain plans to cut air passenger duty on domestic flights in an attempt to boost connectivity across the country as the aviation industry struggles with the damaging effects of the Covid-19 pandemic.

The government will examine options in a consultation to reform the levy on internal flights, according to the Department of Transport, with options including a new lower domestic rate or a return leg exemption that would mean passengers pay only for their outward flight.

“There's a weird situation at the moment where if you fly abroad and back, you pay half as much air passenger duty than if you connect within the UK. That can't be right," transport minister Grant Shapps said in an interview with the BBC on Wednesday.

"It doesn't help keep our communities together and it doesn’t help the country operate."

Critics argue that cutting the cost of flying in the UK does not sit comfortably with the fact that Britain is hosting the United Nations Cop26 climate change summit in November in Glasgow.

Mr Shapps said the plan is to reduce the cost of flying and still hit the country’s target of being net zero by 2050.

“What we'll do overall is make sure that air passenger duty, a tax which was designed with carbon control in mind, is not collecting any less money overall,” he said.

“[But we’ll also] move towards using sustainable aviation fuel, so we remove carbon, something which we can't do internationally, particularly early, because of the distances, but you could do domestically.”

In a separate interview, Mr Shapps urged Britons not to book summer holidays overseas yet and said he was hopeful there would be a green light for flying after May 17.

He indicated that a report due on April 12 may pave the way for the government to give a firm date for international travel, but he stressed there were “no cast-iron guarantees”.

Meanwhile, the government proposals for APD are part of a Union Review, led by Network Rail chairman Peter Hendy, which explores how transport can connect all parts of the UK more effectively.

To get some of the projects identified in the review off the ground, Prime Minister Boris Johnson pledged £20 million ($27.79m) in state funds to improve rail, road and sea connections to boost parts of the country that feel left behind.

The move, part of the government’s “levelling up” agenda, includes faster rail links between England and Scotland, and a review of a bridge between Northern Ireland and Scotland.

"We will harness the incredible power of infrastructure to level up parts of our country that have too long been left off the transport map," Mr Johnson said. "I also want to cut passenger duty on domestic flights so we can support connectivity across the country."

APD is charged per passenger flying from a British airport to a domestic or international destination in bands, which factor in distance and the class of travel.

Airlines have been lobbying for an APD reduction on domestic flights for some time, with the standard rate for UK flights set to rise to £26 per passenger per flight next month.

Whether passengers will actually gain from the APD cut is uncertain, according to Saj Ahmad, chief analyst at Strategic Aero Research,

"The real litmus test to this pricing change is whether Covid-related travel restrictions are eased to the point where freer traveller movement would be supported by airlines putting on more capacity," Mr Ahmad told The National.

“Right now, that’s not assured given the current lockdown, restrictions on non-essential businesses and the work-from-home policy. Passengers might see some piecemeal savings, but with capacity choked, airlines are struggling to make money and will be slow to pass on any price savings, if any.”

While the Airport Operators Association welcomed the proposed APD cut on Wednesday, it called for further support for the beleaguered industry after the collapse of UK domestic carrier Flybe, which went into administration in March last year after failing to secure a bailout from the government.

“Domestic aviation suffered a double hit in the last year, with the collapse of Flybe and the Covid-19 pandemic, and this offers a glimmer of hope for the future,” said Karen Dee, chief executive of AOA.

“The government’s long-promised Aviation Recovery Package must set out an ambitious strategy to return international and domestic connectivity to the UK nations and regions.”

However, environmental campaigners were less supportive, with Doug Parr, chief scientist for Greenpeace UK, stating that cutting duty on domestic flights “would continue our nonsensical trend of the higher the carbon, the lower the tax”.

Mr Ahmad said Britain's target to achieve net zero by 2050 will have to be re-examined in light of the Covid crisis.

“The aviation sector has been obliterated by the pandemic and even with the best will in the world, airlines that have ordered new fuel-efficient airplanes are now deferring deliveries until the domestic and global economy picks up, “ he said.

“While aviation globally accounts for under 2 per cent of all emissions, the finger-pointing at aviation itself has to be addressed. Aviation just seems to be a high-profile and easy target when, in reality, the target should be on other polluting forms of transport like road, sea and rail, which account for far more toxicity.”