US airlines angered by UK tax decision

The Air Transport Association of America has expressed its stiff opposition to the United Kingdom government’s decision to “revise and greatly increase the amounts collected under its air passenger duty”. According to ATA, “this extraterritorial decision by the U.K. government is counterproductive to the airlines’ environmental progress and is in conflict with established law.”

The organisation claims that the increases are substantial even though the U.K. government asserts that it moderated the amount of the air passenger duty increase in light of the world economic crisis. For example, for a one-way flight to the U.K. from the United States, the per-passenger duty in economy class will increase from 40 pounds (approximately $60 U.S.) per passenger today to 60 pounds (approximately $90 U.S.) by 2010.


“The decision to revise and further increase the U.K. duty is a revenue raiser for the government under the guise of environmental protection,” said ATA President and CEO James C. May. “The funds collected do not go to environmental projects, and yet the taxes take money from airlines that they could otherwise invest in more fuel-efficient and greenhouse gas (GHG)-efficient technologies. This is an illegal action, which we expect to be settled in the courts.”



ATA feels the revised duty is in violation of various provisions under the Convention on International Civil Aviation (commonly known as the Chicago Convention) and the relevant bilateral air services agreements that regulate extraterritorial actions and taxes and charges. Among other things, the duty improperly asserts regulatory jurisdiction over flights far outside U.K. airspace, by taxing flights according to various distance bands arbitrarily set by the U.K. government. And a lesser tax is imposed on those flights within the U.K. and the European Union, even though a flight from the United States is not in U.K. airspace for any longer (and often less) than such flights.


ATA states that aside from the legal conflicts, the tax increase is bad policy because it siphons funds away from aviation - the very funds airlines have invested into technology and fuel efficient operations. As a result of these investments, ATA airlines have improved fuel efficiency system-wide by 110 percent since 1978, resulting in a savings of 2.5 billion metric tons of carbon dioxide - roughly equivalent to taking 18.7 million cars off the road each of those years.


“No other industry is more motivated by market forces to improve fuel and GHG efficiency than the airlines,” May said. “Our track record proves that we do not need any further environmental incentives. Even with the recent drop in oil prices, fuel continues to be our highest cost center. With jet fuel averaging between 30 and 50 percent of total airline operating expenses and accounting for well over a third of airline ticket prices, there is no need for any further price signal to reduce fuel burn and resulting emissions.”


ATA says punitive taxation measures compromise the airlines’ record as extremely GHG-efficient economic drivers. On a global level, commercial aviation accounts for approximately 2 percent of man-made carbon dioxide (CO2) and 3 percent of total GHGs while contributing over eight percent of the world’s economic activity. The U.S. airlines have contributed greatly to the worldwide airlines’ strong environmental record. For example, since 2000, ATA member airlines reduced fuel burn and GHG emissions by nearly 3 percent, while transporting 20 percent more passengers and cargo. Moving forward, ATA members have committed to improving fuel efficiency another 30 percent between 2005 and 2025 and are pursuing environmentally friendly alternative jet fuels.


“The airlines will continue to invest in technology and upgrades, develop alternative jet fuels and push for modernization of the air traffic control system,” said May. “If continued environmental progress really is what the U.K. seeks, it should work to advance more positive initiatives, rather than adopting policies that hamper the airlines’ ability to continue a cycle of environmentally-friendly investment.”