The original report was commissioned by the airports in October this year, and the Scottish Parliament has agreed that it should gain control over the air passenger duty tax among all other taxes in Scotland, in a report published by the Smith Commission earlier today (November 27).
The move is a victory for the Scottish Government, and comes just months after Scotland voted ‘no’ against independence from the United Kingdom.
The government has decided it wants to cut air passenger duty rates by 50% before abolishing it altogether.
The bosses at Aberdeen, Glasgow and Edinburgh who originally argued the abolition of the charge described the tax as the highest air passenger tax in the world, and claimed it would bring more economic benefits to Scotland in terms of tourism if it were abolished.
The report warned that by 2016, APD would cost the economy up to £210 million in lost tourism spend per year.
Aberdeen International Airport MD, Carol Benzie has said she was delighted to read the Smith report this morning.
“APD has been a thorn in the side of our industry for many years now, and ultimately it is our customers and passengers who bear the brunt of it. In a recent submission to the Commission I, alongside my colleagues from Glasgow and Edinburgh airports, made a strong case that the Scottish aviation industry could flourish on a global scale if this tax were to be reduced or ultimately abolished north of the border,” she said.
“The Scottish Government has already indicated it would slash or scrap the world’s highest air passenger tax to stimulate the local economy. The right time is now for the whole of the UK to share equally in the benefits a phasing out of APD would deliver.”Dale Keller
BAR UK Chief Executive
On the other hand, the Board of Airline Representatives (BAR UK) who represent 74 airlines, have warned of the potential of competitive distortion.
"The Scottish Government has already indicated it would slash or scrap the world’s highest air passenger tax to stimulate the local economy. The right time is now for the whole of the UK to share equally in the benefits a phasing out of APD would deliver," said Dale Keller, chief executive officer, BAR UK.
A similar view comes from the bosses at Newcastle Airport, who are likely to suffer the most from the decision, being situated only an hour from the Scottish Border.
The devolution of APD in Scotland will encourage more people to fly to and from Scottish Airports, and passengers will travel the extra hour to avoid paying the tax. This will have a detrimental effect on airports in the North East, particularly Newcastle Airport.
David Laws, Chief Executive, said: “We are extremely concerned about these proposals. We have undertaken intensive lobbying, including letters to the Prime Minister, Chancellor and other senior politicians. We have also submitted a full representation to the Smith Commission. This hasn’t been published due to its commercial sensitivity but may be in the future.”
“Our submission predicts 1,000 fewer jobs across the North East by 2025, significant impact on passenger numbers, £400M in Gross Value Added (GVA) lost between 2015 and 2025, and additional journey time costs of £265M between 2015 and 2025,” he added.
The Airport Operators Association for UK airports has agreed that the expected removal of the APD tax in Scotland should be echoed throughout the rest of the UK
Darren Caplan, Chief Executive of the Airport Operators Association, the trade association for UK airports, said: “A cut in APD anywhere should be matched by a cut everywhere in the UK. The AOA will continue to make this case to the Treasury in the months ahead.”
Glasgow Airport has welcomed the findings of the Smith Commission, reinstating the damaging effect APD is having on tourism in Scotland.
Amanda McMillan, managing director of Glasgow Airport, said: “APD is a damaging, regressive tax which in addition to dissuading airlines from adding new routes, makes it extremely challenging to maintain existing services. Having full control of APD will play a major role in strengthening Scotland's connectivity and provide yet a further boost to our burgeoning tourism industry."