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Air Passenger Duty Set To Rise By 50% In UK

by Robert Lee,, London

28 November 2008

As part of 2008's pre-budget report, UK Chancellor Alistair Darling has announced that Air Passenger Duty (APD) will be subject to some significant increases in 2009.

APD is a tax on the airlines and, although they are not legally obliged to, many choose to pass on this charge to the passenger in the form of a business charge.

For convenience, this is usually done at the time of the ticket sale, although the tax itself is not due until the aircraft takes off. Whether or not the airline chooses to pass on this latest rate increase is consequently a business decision.

As of November 1, 2009, the government has announced that airlines, travel agents and air passengers, including those who have already booked tickets for travel on or after this date will be subject to the increased rates.

Under the current law flights to any European destination are charged a GBP10 rate of APD, with flights to any other destination subject to GBP40 rate of APD.

However, under the new law, destinations will be categorized into four geographical bands (A-D) based on distance from London to the capital city of the destination country/territory (with the exception of the Russian Federation which is split east and west of the Urals). Each band will have two rates, one for standard class of travel and one for other classes of travel.

Rates will increase on an annual basis, and by the time the law has been effective for two years, passengers falling into the highest band of travel will be paying up to GBP170 worth of APD on flights to destinations such as Australia, Singapore, New Zealand, Argentina and Chile. Those in the lower bands can expect to be paying between GBP24 and GBP150 worth of APD for flights to the same destinations, and the lowest rate of APD in the lowest band will increase to GBP12.

The total tax raised from APD is expected to rise from GBP1.97bn (USD3bn) in 2008-09 to GBP3.06bn in 2011-12.

Changes will have effect in relation to any carriage of a passenger which begins on or after November 1, 2009, irrespective of when the ticket for travel was booked or purchased, which has caused outrage from some airlines, such as Ryanair.

Condemning the government's decision as "damaging to the UK tourism industry (when visitor numbers are already falling) and devastating for regional airports where passengers and visitors demand low fares and are most price sensitive", the airline has also made claims that the APD increase fails to reward airlines which invest in brand new aircraft and operate younger, cleaner, more environmentally friendly aircraft.

Speaking of the government's decision, Michael Cawley, a Ryanair spokesman commented:

"Our greatest concern is the devastation this regressive tax will have on our regional bases, which we have grown due to Ryanair’s commitment to lowering fares. The government is insane if it thinks these price sensitive passengers will continue to travel if faced with increased costs."

Darling has defended his decision to increase APD, stating that the new system has been designed as part of the government's plans to reduce the UK's carbon emissions by making individuals flying further pay more to compensate for the damage done to the environment.

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