The UK risks losing up to 120,000 jobs from the aviation sector over the next two decades if it does not improve competitiveness, according to a new IATA report.
Lack of airport infrastructure in southeast England, the world’s highest rate of passenger charges and taxes, together with a relatively restrictive visa regime are the main negative factors that could impinge on the country’s aviation sector, which currently accounts for 1.6 million jobs and contributes £89 billion ($120 billion) annually to the UK’s economy, or 4.5% of GDP, the report stated.
At a July 9 IATA briefing in London on the report—“The UK Competitiveness Index and Value of Aviation”—IATA regional VP-Europe Rafael Schvartzman and chief economist Brian Pearce said the UK must do more to maintain or improve its position in the global aviation sector, especially given the need to increase overseas trade links after the country leaves the European Union (Brexit), scheduled for Oct. 31 this year.
The IATA report noted the UK is second, only behind the Netherlands, in terms of low runway infrastructure capacity in a group of 17 European nations. London’s Heathrow Airport, the country’s major international hub, operates at 99% capacity and its long-awaited third runway is scheduled to be operational by the middle of the next decade. It still faces likely legal challenges from environmental groups.
The UK is also at the bottom of a group of 17 nations in terms of airport and passenger taxes and charges. IATA assigns the UK a score of 148 in terms of such costs—well ahead of the second-placed nation, Germany, with a score of 111 and Sweden, with 106.
By contrast, Finland has a score of just 23 on the scale, while the best country in terms of low charges is Poland, with 20.
The UK’s Air Passenger Duty (APD), introduced by the government in the depths of the financial crisis, is the most onerous such charge anywhere in the world. Repeated appeals by the aviation sector to have it rescinded, or at least reduced, have fallen on deaf ears at the UK Treasury, which takes in around £4 billion ($5 billion) annually from the tax.
IATA repeated that appeal July 9. Asked whether it was not flogging a dead horse, given the government’s intransigence on this issue, Pearce replied: “It may be dead, but we still think it’s worth flogging.”
He accepted that it is very difficult to get a finance ministry to give up an established tax. Although the industry is adamant that repealing it would bring in more money through increased trade and tourism than it loses through tax, the government appears loathe to surrender today’s tax for the promise of something better in the future.
The government can also point to the UK’s robust air travel market as an argument that APD has not harmed growth.
On the day the French government proposed an eco-tax on all outbound air journeys, Pearce and Schvartzman said IATA is strongly in favor of offset payments, rather than more taxes, as a means of reducing aviation’s carbon dioxide (CO2) emissions.
They said that news of the tax had come as a surprise, given that a French government consultative exercise had determined that, even before any additional charges, the French aviation sector was uncompetitive compared to many of its international peers…