UK Airlines Follow US Lead In Seeking Tax Breaks

by Jason Gorringe, Tax-News.com, London

20 September 2001

Union leaders are joining the chief executives of the UK's top airlines in seeking tax breaks in order to combat fare hikes and further job losses in the wake of last week's events.

Virgin boss Sir Richard Branson, and CEO of British Airways, Rod Eddington, met with the UK Transport Secretary Stephen Byers earlier this week, and spoke afterwards of creating a level playing field for UK airlines, as the US government comes closer to striking an assistance deal with the stricken airline industry across the Atlantic.

The two men asked the Transport Secretary to consider the abolition of airport taxes in the face of rising costs and falling demand from fearful travellers. 'There is a high airport tax on every passenger who travels,' explained Sir Richard. 'We believe that airport tax should be got rid of to ensure that increased costs that airlines are paying, such as high fuel costs, do not result in airline prices going up.'

Today, a delegation of union leaders led by John Monks, general secretary of the Trades Union Congress, will meet Mr Byers to give him the same message. Pilots' union BALPA will suggest that airport and ticket taxes should be redirected to support the industry.

It is understood that no concrete decision has been made regarding possible rescue measures, as both the airlines and the government are keen to see what the US government offers in terms of aid before striking a deal. However, a statement released by the Transport Department was reassuring that the need for the competitive position of British airlines to be maintained had been understood. The Treasury has not ruled out a redirection of the ticket taxes, but said that tax changes were normally a budget matter: 'As the Chancellor has made clear, the priority for the government is to put in place the conditions for macro-economic stability and growth,' said a spokesperson.

Meanwhile, in America, it was announced that US airlines have dropped their request for the elimination of federal tax on jet fuel through August 2002, and have also decided not to ask to retain ticket and cargo taxes collected during the same period, after the Bush administration balked at the prospect when it was initially raised.

They have instead requested a slimmed-down aid package, to include $5 billion to cover losses from the government shutdown of airports, and $12.5 billion in loan guarantees, although no decision has been made as yet. The government declined to comment on whether it would consider limiting the liability faced by United and American airlines as a result of the hijackings and subsequent attacks.

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