Chief of airline industry attacks 'tax bandit' UK

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The Independent Online

The head of the global airline industry's trade body has accused the British government of being a "tax bandit" over its collection of $4.5bn (£3bn) a year in Air Passenger Duty (APD).

Giovanni Bisignani, chief executive of the International Air Transport Association (Iata), made his comments as it forecast that the world's largest airlines would collectively make a net profit of $4bn this year – $14bn less than the 230 carriers earned in 2010 – because of disasters such as the earthquake and tsunami in Japan, unrest in the Middle East and North Africa, and soaring oil prices.

Unveiling his "hit parade of government tax bandits" on what he called a "wall of shame", Mr Bisignani said the UK levied the "largest aviation tax in the world" with its APD, which rose from 1 November from £11 to £12 per passenger for economy flights out of the UK, although the Chancellor, George Osborne, temporarily froze the duty in his March Budget.

Mr Bisignani also criticised Germany's $1.3bn departure tax, Austria's similar $119m duty and India's $450m service tax. He said: "The UK, Germany, Austria and India need a textbook on aviation's economic role."

Last month, Europe's second-biggest low-cost carrier, easyJet, said higher taxes accounted for £21m of its £153m loss in the six months to 31 March, which is traditionally the weaker half-year for most airlines and travel companies. On a global scale, the downgrade for the sector follows Iata forecasting as recently as March that the industry would make $8.6bn profit. The organisation said that, based on the sector's expected revenues of $598bn, a $4bn profit equated to a wafer-thin 0.7 per cent margin.

"Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations to $4bn this year," Mr Bisignani added.

"That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance. The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel. But with a dismal 0.7 per cent margin, there is little buffer left against further shocks."

Iata's oil price statistics make for painful reading for airlines. It expects the average price of Brent crude to be $110 a barrel this year – 15 per cent more than its previous forecast of $96. Ominously, Iata said that for each dollar rise in the annual price of oil, airlines faced an extra $1.6bn in costs. As an estimated half of the industry's fuel requirements are hedged at 2010 price levels, the this year's fuel bill will soar by $10bn to $176bn.

Mr Bisignani said: "We have built enormous efficiencies over the last decade. In 2001, we needed oil below $25 per barrel to be profitable. Today, we are looking at a small profit with oil at $110 per barrel."

Iata estimates that fuel now accounts for 30 per cent of an airline's costs, compared with 13 per cent in 2001.