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Heathrow numbers could see 22 percent decrease if passenger tax goes through

Dec 30, 2012 4:02 am

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With ticket prices increasing on busy routes, any increase in passenger duty will have a big price effect on more-price-sensitive traveling families and make them switch to smaller/alternative airports.

— Rafat Ali

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The number of passengers who use Heathrow will fall dramatically if there's 50% increase in Air Passenger Duty at those airports, study shows.


Radical plans to raise taxes at overburdened airports in the south-east of England would encourage passengers to switch to other airports, according to official research commissioned by Her Majesty’s Revenue & Customs in UK.

Analysis by the Department for Transport suggests that a 50% rise in air passenger duty at Heathrow and Gatwick would be high enough to persuade passengers to switch to airports like Luton and Stansted.

The report, Modelling the Effects of Price Differentials at UK Airports (embedded in full below), is being studied by several MPs, including the prime minister’s former green adviser, Zac Goldsmith, who are keen for it to be submitted as evidence to the independent commission on aviation, chaired by Sir Howard Davies. It suggests that applying different rates of tax at airports would create a better regional balance in passenger numbers and take pressure off Heathrow and Gatwick. As the analysis observes: “Despite significant growth in regional airports, the aviation market remains dominated by airports in London and the south-east.”

The DfT predicts that 100 million passengers paying the duty will fly out of a UK airport in 2014. However, more than half – 53 million – will depart from one of the five airports in the south-east and more than a fifth – 23 million – from Heathrow alone.

But any move to increase the duty is likely to be unpopular. APD can add as much as £92 to the price of an economy flight and typically costs the average family more than £115 a year, according to the Airport Operators Association.

The campaign group A Fair Tax on Flying says that “a family of four flying in economy class from the UK to the US pays £260 in APD tax, whereas in France the equivalent tax is only £38″.

George Osborne, the chancellor, confirmed in his autumn statement that APD would rise in April – the fifth increase in as many years. Although the rate of tax paid by those flying to Europe will remain the same (£13 per person), long-haul fliers will be expected to contribute an extra £2-£3 per person. The rates are doubled for a family flying in premium economy, business or first-class cabins.

Sarah Clayton, of the campaign group AirportWatch, said increasing duty at certain airports could help ease congestion. “We have sufficient capacity at our airports if only we used it properly,” she said.

According to the Department for Transport’s economic modelling, increasing the duty by 50% on flights out of Heathrow would see the number of passengers flying from the airport fall by around 22%, with travellers switching to other airports in the south-east and the Midlands. The analysis suggests passenger numbers at Stansted, would increase by 20% and by 25% at Luton by 2020.

The vast majority of those switching would be those on long-haul flights which would be most affected by the price increase. By 2020 the number of long-haul passengers at Stansted would rise by more than 1 million, and at Birmingham by around 2 million, the analysis suggests. As more passengers switched to regional airports, the likes of Stansted and Birmingham would start to offer more services with greater frequency, “thereby attracting further passenger demand in future years”.

Alternatively, increasing duty by 50% at Gatwick would see the number of passengers fall by “around 30% by 2020″. The report explains: “The impact on Gatwick is much more severe due to the more price-sensitive nature of its customer base, and the lower frequencies offered on many routes relative to Heathrow.”

Lower prices at Scottish and Welsh airports would see demand switch away from neighbouring airports.

This article originally appeared on guardian.co.uk

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