Scotland set to cut air travel taxes under new UK deal

Starting 2015, Scotland is likely to cut taxes on passengers flying out of the country following a new tax deal with Britain, according to a report by Reuters.

In line with proposals by the Smith Commission, the UK government last week promised new powers to the Scottish Parliament over a range of financial matters, including control over air passenger duty (APD). The new proposals would allow the Scottish National Party (SNP) to fulfil its promise of scrapping or reducing the tax in Scotland.

Britain levies a tax of between £13.00 ($20.5) and £0.194 in APD depending on flight distance and class of travel, which is charged on each passenger travelling out of the country. The tax cut is expected to encourage English people to travel north of the border to fly as it could make travelling out of Scotland cheaper for passengers.

Airlines and holiday companies have welcomed the plan to cut the APD charges in Scotland. Scrapping APD will boost tourism in Scotland by GBP200m annually, according to British Airways-owner IAG.

‘Removing Scottish APD would see passengers rushing across the border to avoid paying the punitive tax at Newcastle, Manchester or any other English airport,’ said Willie Walsh, the chief executive of IAG. ‘Who could blame them – a family of four flying to the U.S. would save 276 pounds in APD by heading north.’

Regional airline Flybe also said that the tax cuts could benefit Scotland as it will encourage airlines to provide additional routes from Scotland. ‘The move would not only encourage airlines to provide new routes and enhance travel for Scotland’s passengers, but it would also significantly boost economic activity and connectivity for Scotland,’ said Flybe chief executive Saad Hammad.

The new powers and provisions will be implemented only after the UK parliamentary election due in May next year. The move implies the biggest transfer of powers to Scotland from the United Kingdom since 1999 when a Scottish parliament was set up. The changes also come after Scottish separatists lost an independence vote two months ago.

Ryanair to cut Belgium flights over local air tax

Ryanair has threatened to cut services to and from Belgium’s Charleroi Airport after the local Walloon government decided to impose a EUR3 tax on airfares.

The tax will be effective from January 1, following a decision by the Walloon administration, but subject to approval by the central government in Brussels.

Ryanair said that it would cut almost one in five services if the levy is approved, resulting in one million fewer passengers. Ryanair, the biggest airline operator in the southern Wallonia region, and the single biggest operator at Charleroi, also claimed the move would result in 1,000 job losses. The carrier presently operates more than 80 percent of services at Charleroi, carrying 5.35 million passengers last year.

‘Studies have demonstrated the damage caused to traffic and jobs by passenger taxes, especially in Germany, Ireland and the UK,’ a Ryanair spokesman said, adding that Ryanair would call for the plans to be scrapped.

Jean-Jacques Cloquet, the head of Charleroi airport, said he could not comprehend the local government decision, adding: ‘It could do a lot of damage to the Charleroi region.’

‘For me, it’s not a good decision,’ he said, adding that he expected the central government will block the tax.

However, Andre Antoine, the Wallonia budget minister, claimed that Ryanair makes large profits and a EUR3 levy on airfares from the region would not hit traffic.

Ryanair has been operating to Charleroi since 1997, and the airport was the carrier’s first base on the Continent. The airport reportedly receives substantial grants from the local government, with Brussels Airlines claiming last year that Charleroi receives a EUR12 subsidy per passenger.

Earlier this month, the European Commission announced plans to slash government subsidies to regional airports.