The UK government is reported to be considering cutting air passenger duty (APD) on some or all domestic flights to assist regional airline Flybe, which has requested relief on its existing passenger duty bill. The regional UK airline, which was acquired by Connect Airways – a consortium owned by Virgin Atlantic and its partners Stobart Group and Cyrus Capital last year – has petitioned the government after its financial situation deteriorated. However, UK prime minister Boris Johnson said this morning: “It is not for government to step in and save companies that simply run into trouble, but be in no doubt that we see the importance of Flybe in delivering connectivity across the whole United Kingdom,” Johnson told BBC television. “We’re working very hard to do what we can.”
Flybe – Virgin Connect – has not issued any official statement on the situation of the airline but Sky News has reported that the airline needs to defer a payment of £100 million in APD owned for three years. Further reports say that the airline also need to urgently raise fresh funds to survive through the winter period.
The UK government is not able to accede to Flybe demands to cut its existing APD bill since it would breach EU state aid laws and existing UK tax policy. However, the UK Department for Transport, the Department for Business, Energy and Industrial Strategy and the Treasury are meeting today to discuss options to cut future tax pressures for domestic flights and to maintain and/or improve regional connectivity in the UK.
Any relief from APD would be welcomed by UK airlines, which have long opposed the tax that levies £13 on every passenger departing on flights from UK airports. Flybe has claimed that this tax makes it impossible to compete with rail and road travel within the UK. Environmentalists have condemned the possible removal of APD that would encourage air travel over land-based options. Indeed, many are calling for new green taxes on air travel to discourage short-haul flying.
Commenting on the reports that the UK government is to consider cuts to APD, Professor Sam Fankhauser, director of the Grantham Research Institute on Climate Change and the Environment at LSE, said the proposal “would likely lead to a rise in greenhouse gas emissions from flights landing and taking off from UK airports”. He suggests that the government should focus on improving alternative sustainable travel options and consider turning the APD into a green tax "so that passengers are charged at a rate that reflects the emissions that are created".