Caribbean Flights Holding Up Despite External Tax Knocks

by Amanda Banks, Tax-News.com, London

04 November 2009

Demand for flights to St Kitts and Nevis appears to have held up despite various potentially damaging factors, including the UK government's Air Passenger Duty, which increased on November 1, 2009, and the financial crisis.

Traffic statistics for St Kitts' Robert L Bradshaw International Airport were up 6% despite fears that external factors could damage the Caribbean tourism industry.

Statistics published on October 28 showed that despite a 25% drop in flights to St Kitts and Nevis year-on-year, overall demand for flights to the Caribbean has not slumped.

According to the Department of Finance and Statistics, 9,161 passengers passed through the airport in September 2009 from 476 flights, compared to 8,605 passengers from 642 flights in September 2008.

Whilst demand for travel to the tourism-dependent region appears to have been resilient, it has been anticipated that the Caribbean will see a decrease in jetsetters following the UK government’s decision to follow through with its first round of hikes to its Air Passenger Duty that will eventually double the tax.

Efforts to exert pressure on the UK government to change to an emissions-based scheme, or, failing that, to levy taxes more proportionately on distance, have yielded no results for the industry so far.

The UK government’s October hike to the Air Passenger Duty has had the following effect:

  • Tax on Band A flights (those under 2,000 miles) increased marginally from GBP10 to GBP11;
  • Tax on Band B flights (flights of 2,001-4,000 miles) increased from GBP40 to GBP45;
  • Tax on Band C flights (flights of 4,001-6,000 miles) increased from GBP40 to GBP50;
  • Tax on Band D flights, (travelling 6,000 or more miles) such as to the Caribbean, increased to GBP55.

Passengers flying in premium class will pay double.

The next wave of hikes to this duty, scheduled for November 2010, will increase the APD on flights further than 6,000 miles to GBP85 for economy class, and GBP170 for business class.

However, despite the higher passenger taxes, British Airways (BA) has committed itself to increasing flights to the region, a decision lauded by Caribbean governments.

On October 26, BA announced that it would be launching new flights from London Gatwick to the Dominican Republic and Jamaica, equating to an additional 2,000 seats a week, and further disclosed that it would expand its operations to St Kitts and Nevis, Grenada, Barbados and Bermuda next summer.

BA plans to operate a total of 55 flights a week from London to the Caribbean, with 11 destinations served from Gatwick and three from London Heathrow.

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