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IATA to UK Transport Select Committee: Cut APD on Domestic Flights

December 23, 2017 Association No Comments Email Email

In comments to the UK Transport Select Committee yesterday, IATA Regional Vice President for Europe, Rafael Schvartzman, called for Air Passenger Duty to be cut on UK domestic return journeys, in order to encourage the regional connectivity that an expanded Heathrow airport could offer.

“Airlines in Europe are operating on a 5% margin, so any additional costs are critical to the viability of a route. It is therefore essential that Heathrow charges remain flat–or are reduced—and that Air Passenger Duty be reduced on domestic flights,” said Schvartzman.

Mr. Schvartzman also made it clear that reforms to air traffic management will also be crucial for the success of the new runway.

“Expanding Heathrow without putting in place the necessary air traffic control reforms would be like buying a Christmas tree and not putting any decorations on it. The government must support the Future Airspace Strategy which is looking to make critical improvements to the airspace,” he said.

In addition, Mr. Schvartzman made the following points on connectivity to Heathrow in the event it will expand with a third runway:

1. Heathrow Airport is the right location for a new runway, and the best option for meeting the Government’s objectives to retain the UK as one of the world’s leading aviation hubs.

. This is true for cargo as much as for passengers. LHR will process 132,000 tons of cargo in December, including exports of salmon, clotted cream and whiskey.

2. But Heathrow cannot be expanded at any price. Affordability remains the airlines main concern. While we welcome some evidence of a cheaper solution emerging, the level of risks associated with cost and schedule remains unknown due to the low level of maturity associated with the program.

3. Heathrow is already far more expensive than its rivals (1) . The Government should give a commitment to flat charges (i.e. less than or equal to today in real terms) at Heathrow. If this cannot be met and fares have to rise to cover excessive cost, then the benefits assumed for the third runway will not be maximized and the competitiveness and viability of certain routes called into question.

4. The CAA has recognized that Heathrow Airport has substantial market power and therefore operates Heathrow Airport on a monopoly basis. Without robust economic regulation on behalf of consumers, a monopoly provider can result in development costs being higher than would be the case if undertaken in a competitive environment.

. So we welcome recognition of new text on statutory undertakings – i.e. additional developers could be considered
b. We believe this could be strengthened to insist that proper competitive tendering takes place if there are credible alternative  promoters
c. This is a once in a generation opportunity to maximize the economic benefit to the UK.

5. On the issue of night noise, airlines recognize that night noise is a sensitive topic and we support the need for meaningful respite from noise. We believe this can be achieved whilst allowing valuable and established connections to be safeguarded.

a.  It is vital to maintain the existing early morning arrivals which link the UK to important emerging markets in the Far East
b. Early morning arrivals have huge economic value of over £1 billion per year to the economy. Because many of these flights will not be able to change their slot times on the origin end of the route there is a big risk that the airlines would be forced to seek alternative European destinations into which to schedule their early morning flights.
c. If the night ban is moved to 6am major European hubs will have a two-hour head start on connections. It could mean British business misses out.

(1) According to the Leigh Fisher review of Airport Charges 2016, Heathrow is 35% more expensive than Frankfurt, 60% more expensive than Paris CDG, 115% more expensive than Amsterdam Schiphol, and 175% more expensive than Dubai (DXB).

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