Airlines Oppose UK Tax

The Air Transport Association of America (ATA), the trade group for U.S. airlines,
expressed stiff opposition to the UK government’s decision to revise and greatly increase the amounts collected under its air passenger duty. The ATA said the extraterritorial decision by the government is counterproductive to the airlines’ environmental progress and is in conflict with established law. For a one-way flight to the UK from the U.S., the per-passenger duty in economy class will increase from 40 pounds (approximately $60 U.S.) per passenger to 60 pounds (approximately $90 U.S.) by 2010.

“The decision to revise and further increase the UK duty is a revenue raiser for the government under the guise of environmental protection,” said ATA president and CEO James C. May. “The funds collected do not go to environmental projects, and yet the taxes take money from airlines that they could otherwise invest in more fuel-efficient and greenhouse gas (GHG)-efficient technologies. This is an illegal action, which we expect to be settled in the courts.”

Though the UK government asserts that it moderated the amount of the air passenger duty increase in light of the world economic crisis, the increases still are substantial, the ATA argues.  “Aside from the legal conflicts, the tax increase is bad policy because it siphons funds away from aviation—the very funds airlines have invested in technology and fuel-efficient operations. As a result of these investments, ATA airlines have improved fuel efficiency system-wide by 110 percent since 1978, resulting in a savings of 2.5 billion metric tons of carbon dioxide—roughly equivalent to taking 18.7 million cars off the road each of those years,” the ATA said.

“No other industry is more motivated by market forces to improve fuel and GHG efficiency than the airlines,” May said. “Our track record proves that we do not need any further environmental incentives. Even with the recent drop in oil prices, fuel continues to be our highest cost center. With jet fuel averaging between 30 and 50 percent of total airline operating expenses and accounting for well over a third of airline ticket prices, there is no need for any further price signal to reduce fuel burn and resulting emissions.”

The ATA said the revised duty is in violation of various provisions under the Convention on International Civil Aviation (commonly known as the Chicago Convention) and the relevant bilateral air services agreements that regulate extraterritorial actions and taxes and charges.

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