Air Passenger Duty (APD) has long been a cause célèbre in the travel industry. Willie Walsh, CEO of IAG, the group forged from the union of Iberia and British Airways in 2011, has championed its abolition incessantly over the years - most recently using the issue to wade into the Scottish independence debate on the BBC. “If anything,” he said, “it might be marginally positive because I suspect the Scottish government will abolish air passenger duty, because they recognise the huge impact that that tax has on their economy.”
Leaving aside the fact that the level of airfares is probably not the strongest argument for or against Scottish self-rule, it's certainly true that APD hits British travellers hard. When Gordon Brown doubled it while Chancellor in 2006, he claimed it was a “green” levy. However, unless such a tax is applied per plane rather than per paying passenger, it doesn't work that way: empty or full, those seats will still shuttle back and forth. By 2011, even the Treasury had got the message: “Air passenger duty is primarily a revenue-raising duty ...” it said. “Whilst also giving rise to secondary environmental benefits.”
APD is charged per passenger flying from a UK airport. It's currently banded from A to D according to how far you fly, and ranges from £13 for a journey of up to 2,000 miles (the UK to anywhere in Europe) to £94 on journeys over 6,000 miles (flights to Australia, for example). Anyone in the posh seats pays more: up to £188. However, which band an individual country falls into depends on the distance between its capital city and London, which throws up some anomalies. The most frequently cited of these is that the APD to Hawaii (7,280 miles away) is less than it is to the Barbados (4,202 miles away) because Washington DC is used as the reference point for the whole of the US.
Confused? Well, as a result of last week's Budget announcement by Chancellor George Osborne, things get a bit simpler. From April 2015, once you've gone beyond the 2,000-mile Band A limit, you will be taxed at Band B (which nevertheless rises to £69 per passenger next month and £71 in April 2015) whether you travel to Honolulu, Bridgetown or Sydney.
The APD tweak met with some support in the travel industry. However, it's hard to see that it will greatly affect our holiday choices. British air passengers are among the most heavily taxed in the world, but the amount such tariffs contribute to the price of a trip is hidden from view by the all-inclusive price that airlines and tour operators are required to publish.
Oh well, at least travellers to the Caribbean can rejoice. A family of four travelling in economy class this summer will pay £340 in APD, while next summer the total tax will fall by £56. But consider this: a return flight to Antigua in March 2015 on BA is currently £2,689 for a family of four; the net effect is therefore a reduction of just 2 per cent.
It seems that while those revenues still need to be raised, APD is going nowhere.