IN a speech that fell largely below the radar a couple of weeks ago, Alex Salmond resurrected the thorny issue of air passenger duty (APD) and the prospect of devolving control of the tax to Holyrood.
The First Minister said recent research presented an "overwhelming case" in favour of the option.
In particular, Mr Salmond cited the York Aviation report – commissioned last year by Edinburgh, Glasgow and Aberdeen airports – which concluded that the current level of APD would see Scotland lose two million passengers and £210m a year in tourist spend by 2016, and a PwC paper published in February (and commissioned by British Airways, easyJet, Ryanair and Virgin Atlantic) which found that UK APD was now the highest tax of its type in the world. Abolishing it, said PwC, would boost UK exports by 5% over the next three years and magic up around 60,000 new jobs.
Worst of all though, the record rates of APD – which reached a new high on April 1 this year – were hurting Scotland's economy by discouraging airlines from establishing direct routes from Scottish airports, said Mr Salmond.
It was "clearly ludicrous", he added, "to have a situation where one part of the UK, London, has airports which are already at capacity, while other parts of the country need to encourage more direct links".
It is a conundrum in the Scottish Government's green agenda that, while it sets ambitious targets to generate 50% of the country's electricity from renewable sources by 2015, it appears sympathetic to the aviation industry's desire for more traffic and cheaper tariffs – something of a slap in the face for environmentalists who argue that airlines are subsidised to the tune of some £11 billion a year through exemptions from VAT and fuel tax.
On the flip side, airlines contend they are under pressure from ever-steeper rates of APD, which have climbed from £5 per passenger in 1994 for short-haul flights to £13 today. Long-haul charges meanwhile have increased from £40 to £94 per passenger in economy and £188 for all other cabins. According to research by the Charles Stanley Group, APD now accounts for 15 to 20% of the fare for planes taking off in the UK.
If the Northern Irish example is anything to go by, devolving APD is much the same as scrapping it – at least in long–haul terms. The Northern Ireland Assembly, which was given powers to set its own APD on January 1 this year, has reduced the rate on all but the shortest banding – up to 2000 miles, roughly equivalent to flying Belfast to Istanbul – to zero.
Meanwhile, I understand that an "important announcement" is pending in relation to another contentious airline issue – the route development fund. The scheme, which allowed the Scottish Government to pay subsidies to chosen airlines in exchange for setting up direct routes in and out of Scotland, was outlawed by the EU in 2007. Efforts have been under way at Holyrood ever since to revive it in some alternative format.
This will be welcome news for airports but it might prove harder to fly with the environmental lobby and APD-squeezed rival carriers.
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