Billion pound benefit of cutting air passenger tax

The report goes on to warn that, without action, Scotland could lose out on nearly one million passengers every year, costing the Scottish economy up to £68 million in lost tourism.

The tax, which can range from £13 per flight for travel in the UK to up to £194 for long haul journeys, raised £2.9bn in 2013/14 with approximately £200m coming from Scotland.

Currently regulated by the Westminster Government, the handing over of control to the Scottish Government was a key element of the Smith Commission on greater devolved powers following last year's independence referendum. The Scottish Government has already indicated it wants to see the tax cut by half.

Gordon Dewar, chief executive of Edinburgh Airport, called on SNP ministers to act quickly and provide a clear timetable for the reduction of APD to allow airlines and the tourism industry to plan for the change.

He said: "We've long argued that APD is a tax on Scotland's ability to compete with European airports of or size and our economy is footing the bill in lost jobs and lost opportunities.

"It's also damaging the ability for our passengers to travel and to take advantage of the amazing connectivity we have from Edinburgh.

"Our report shows that the economic benefit of a reduction will outweigh any lost tax revenues and it's therefore reasonable for passengers, airlines and the tourism industry to have some certainty on when this regressive tax will be reduced, and to know whether it will eventually be scrapped."

Mike Cantlay, chairman of tourism body VisitScotland, said there was no doubt APD was a "major deterrent" to many potential visitors.

"Few other EU countries levy APD so this places Scottish tourism at a competitive disadvantage and we are pleased that fiscal authority for APD will ultimately be transferred to the Scottish Government," he said.

Tristan Nesbitt, chairman of the Edinburgh Hotels Association, added: "Edinburgh is a world-class destination and an international creative and cultural hub that welcomes over four million visitors per year.

"A reduction in APD would make Edinburgh more competitive in all tourism segments, particularly in terms of business tourism which is key to driving year-round demand for the city."

The report, produced in partnership with independent consultancy firm York Aviation, reiterates the findings of previous studies undertaken on behalf of Scotland's airports and shows that APD is a significant barrier to growth.

It found that a 50 per cent reduction would provide benefits to Scotland worth £200m per annum as well as creating additional jobs.

The biggest gain in terms of passenger travel will be at Prestwick Airport where some 300,000 extra travellers could be generated by 2020 because of the combination of the tax cut with "ultra low" fares from Ryanair.

Edinburgh Airport would expect to gain some 300,000 additional passengers with Glasgow seeing a 200,000 increase, Aberdeen attracting 30,000 extra and Inverness acquiring around 20,000 more.

The report concluded: "Overall, it is clear that a 50 per cent reduction in APD will increase traffic through Scotland's airports. By 2020, these gains will total around 0.9 million passengers per annum.

"Although, there is some variation in the extent to which different airports benefit, all the main Scottish airports would receive a boost from the reduction in APD."

A Scottish Government spokeswoman said: "Devolving APD to Scotland as soon as possible will help to unlock the country's full economic potential, bringing more international flights to and from Scotland as well as cutting costs for passengers.

"In terms of the timetable, only once the necessary legislation has been passed by the UK Parliament will the Scottish Government be able to legislate for a replacement Scottish tax.

"No specific timetable has been given by the UK government for passing the legislation, but we continue to argue for this to happen as soon as possible."