Select Committee Report

Manston: one last diversion

One of the few pieces of advice I’ve ever paid attention to is: ask yourself “What’s really going on here?” So… what was the Select Committee about, and why did it spend so much time looking at Manston?

The publicly stated remit for the Committee was to inquire on the “role of smaller airports, and the steps the Government and EU are taking to support them”. In practice, there was little exploration of their role, and much more emphasis on how to support them. In aviation, support usually means tax breaks - in this case the tax is Air Passenger Duty (APD).

The aviation industry has complained about APD ever since it was invented, and regional devolution has made things worse. Northern Ireland’s Belfast airport clearly illustrates the disadvantage of APD in the business it loses to neighbouring Dublin airport. Scotland has the power to drop APD, which would jeopardize Newcastle airport. If Wales does likewise, Bristol airport would be threatened. All the smaller airports in England are getting twitchy, complaining it’s not a level playing field.

The Select Committee provided the aviation industry with a forum to air its grievances about APD. The Committee’s report provides the Department for Transport and the (English) smaller airports with a stick with which to beat the Treasury. In that respect, it’s served its purpose.

So what about Manston?

Manston airport had already closed before the inquiry started. The Select Committee considered Manston as a case study "both to inform our wider recommendations and because the Kent public are concerned". In fact, the amount of "concern" in Kent had been exaggerated by aviation lobby groups, and then magnified by Sir Roger Gale’s access to Ministers and media. Manston turned out to be little more than a diversion.

Inexplicably, the Select Committee failed to take the opportunity to be “informed” by the people they questioned. Alastair Welch had been General Manager at Stansted, and then bucked the national trend in making Southend Airport a success. In contrast, Tony Freudmann (part of the team that wants to grab the site) has been closely involved with more aviation failures than anyone else I know.

It was a perfect opportunity for the Select Committee to find out what makes a small airport succeed, what makes it fail, and what role APD might play. And they fluffed it. Instead, they spent a large portion of their precious time delving into the share-holdings and ownership of the companies that own the ex-airport site.

I got the impression that the Committee Chair, Louise Ellman, didn’t fully understand the questions she was asking on this subject, let alone the answers. I suspect she had been fed the questions by Sir Roger, who in turn had been fed by the “pro-Manston” groups. The Select Committee learnt nothing from their case study of Manston that could usefully be applied to other smaller airports, or to their consideration of the impact of APD.

The Committee’s remit covered 40 or so airports across the country - open, active airports. Why did they spend so much time asking Sir Roger’s questions about a closed airport? For the same reason Minister Hayes came to Kent to re-announce a DfT inquiry while standing next to a parliamentary candidate - electioneering.

Anyway, on with the report…

* * * SPOILER ALERT * *  *

There’s a lengthy rehash of the time wasted on the 2nd and 23rd Feb - Manston’s history and irrelevant questions about ownership. Ann Gloag is invited to publish her commercial arrangements, TDC is dissed for being small fry, KCC and DfT are rebuked for not having been more helpful, DfT is encouraged to play the sensible grown-up, and the Government confirms it has no interest in buying Manston.

In TDC’s place, I would be peeved - central Government has no “right of oversight”, the Council has followed due process, and that should be the end of it. The Committee haven’t considered the possibility that it didn’t take long, and didn’t cost much, for TDC to reach their decision simply because it was so obvious. (Is this 6 month old company, based in a foreign tax haven, with no accounts, and no up-front cash a prudent choice? No.)

In KCC’s place, I would be peeved - yes, KCC did change their minds… because the facts changed. For years assorted owners had been telling KCC that the airport was a sure-fire winner. Then the owner tells them it’s a dead duck. And it’s not central Government’s place to tell KCC how to spend its budget, just as it's not KCC's place to prop up a failed business. KCC's job is to focus on what's best for Kent, and KCC has clearly decided that regeneration is the best available option.

In Ann Gloag’s place, I would tell them to take a running jump.

---

Click on the little boxy symbol next to the magnifying glasses to make it go full screen. Click on any item in the Contents list to jump to that page.

SC Report by NoNightFlights

Manston: "Airports could go out of business"

Some regional airports could go out of business if the Government fails to recognise their important role in easing the nation’s capacity crisis. That's the warning from Manston Airport chief executive Charles Buchanan.

He argues that direct and immediate action is needed to resolve the short and long-term airport capacity shortages at Heathrow, Gatwick and Stansted where new runways have been ruled out indefinitely. In Manston's submission to a consultation on aviation policy, he urges the Government to look to existing regional airports to buy time for longer term plans to be explored.

"Realistically no new runway will be built in the South East for at least 10 years, probably 15 years, but regional airports can deliver capacity now. The downturn in the economy has seen a number of the smaller regional airports, including some in the South East, operate at a significant financial loss, with the real possibility that it will only be a matter of time before the industry starts to see the closure of some of these currently loss-making airports. Once closed, they will probably be lost forever and not replaced."

Mr Buchanan also wants to see different rates of Air Passenger Duty (APD) applying at congested airports to persuade airlines to operate out of smaller ones like Manston.

Meanwhile, the British Chambers of Commerce has called on the Government to develop an aviation policy that supports business growth and job creation. It also wants ministers to scrap proposed APD increases. Jo James, chief executive of Kent Invicta Chamber of Commerce, said:

"In Kent we have a particular interest in aviation policy owing to the controversial question of the expansion of airport facilities within the county. If companies are to make the most of the opportunities offered by international trade, it is essential that a cohesive aviation policy is developed, and definitive decisions reached on future developments."

KentOnline 2nd Nov 2011

Q: What DOESN'T connect George Best, John Lennon and Robin Hood?

A: Flybe

George Best is Belfast's airport, John Lennon is Liverpool's and Robin Hood is Doncaster's. Flybe used to have scheduled flights connecting them, but that was before their share price fell through the floor after their recent profit warning.

In Charles Buchanan's position, I would be rather by worried by the second paragraph of Flybe's statement...

---

The Flybe service from George Best Belfast City Airport to John Lennon Liverpool will be axed at the end of the month. The Belfast to Doncaster flight will also cease on 30 October. The airline operates three return flights daily from Belfast to Liverpool and one to Doncaster.

Shares in Flybe plunged by 36% on Wednesday after it said there had been a "significant slowdown in sales" across its UK domestic network. In May, the Exeter-based airline warned of the impact of the spending slowdown, as well as unveiling a £3 fuel surcharge for all flights which came into force last month. The airline told BBC Online:

"Flybe can confirm that with effect from 30 October 2011 it will cease operating services from George Best Belfast City Airport to Liverpool and Doncaster. Flybe carefully reviews the viability of all its 200 plus routes looking not only at passenger numbers but also at external cost pressures such as the extortionate Air Passenger Duty system being levied on the domestic aviation sector where its passengers pay twice as much tax as Europe-bound travellers.

This ongoing monitoring of our routes enables us to both increase regularity where demand exists, but also highlights when passenger numbers make a flight economically and environmentally harder to justify."

Flybe's other 16 direct services from Belfast which include flights to London, Gatwick, Birmingham, Manchester, Edinburgh and Southampton are not affected. The company has unveiled its second profits warning in five months. Shares fell 40% to 60p - a total fall of 80% on the flotation price of 295p in December 2010.

BBC Online 6th Oct 2011

(A) Fair Tax On Flying

What a difference a letter makes!

With the letter "A" in front, it's "an alliance of over 30 airlines, airports, tour operators, destinations and travel trade associations calling on the Government to make UK aviation tax fairer", i.e. the aviation industry calling for even more tax breaks. Click their logo to see their Facebook page.

Without the letter "A" in front, it's a group dedicated to "publicising aviation's REAL tax situation", i.e. pointing out how much we're all feather-bedding the aviation industry. Click their logo to see their Facebook page. Here's what they have to say:

---

Airlines pay no tax on aircraft fuel

Motorists pay 59p a litre in fuel duty + VAT at 20%.  Thus petrol tax is at a rate of approx 160%. Tax on aviation fuel is 0%.

Airlines pay no VAT

• There is no VAT on airline tickets.
• There is no VAT on the purchase of aircraft.
  Motorists pay VAT at 20% on the purchase of cars.
• There is no VAT on the servicing of aircraft.
  Motorists pay VAT at 20% on the servicing of their cars.
• There is no VAT on goods sold in airport duty-free shops or on meals served on aircraft.
  Motorists pay VAT on most goods and meals in motorway cafés.

Airports pay no tax on alcohol and tobacco

No tax is paid on drink and tobacco sold in airport duty-free shops. Tax on a bottle of whisky in the High Street is £6.66. Tax on cigarettes in the local shop is about 80%.

Airlines do pay air passenger duty

The total revenue from air passenger duty in 2011-12 is forecast at £3 billion.

The Treasury estimated in October 2009 that the loss of revenue as a result of no fuel tax and no VAT on airlines was at least £10 billion a year. With the increase in fuel tax and VAT since then, the figure must now be around £12 billion.

To achieve fair tax with motorists, air passenger duty would need to be quadrupled!

Thus, compared to car travel, air travel benefits from an annual tax subsidy of around £9 billion.

Air Passenger Duty

Special pleading for yet more handouts from the public purse.

Manston and a clutch of other regional airports are asking the Government to change the way that APD (Air Passenger Duty) is levied. The suggestion is that APD levels should "be set at a lower level for uncongested regional airports with significant available capacity to help alleviate congestion and improve the passenger experience at the main London airports." Charles Buchanan, CEO of Manston airport, says:

"The government should provide economic incentives to encourage airlines to move out of the congested London airports, and importantly to make better use of those where capacity is available. If passengers and airlines want to fly out of airports which are congested then they should pay a premium for doing so, just as motorists pay a premium to drive in central London."

Let's get something straight - the London airports that Mr Buchanan dismisses as "congested" are, in fact, successful. There's a difference. They have large populations in their catchment areas (unlike Manston), and they offer a wide range of popular destinations at competitive prices (unlike Manston).

To compensate for their shortcomings, the regional airports want the Government to penalise passengers for choosing the successful London airports. If you want to fly to somewhere that isn't one of Manston's (two) available destinations, you are to be charged a premium for daring to use a London airport. Absurd!

Just as a quick reminder as to what APD is actually for, here's a summary from AEF:

APD, which is levied on all flights departing from UK airports, was first introduced in 1994 to help account for the fact that no tax is levied on aircraft fuel. Yet APD falls a long way short of fully offsetting this benefit. While the total tax take from APD in 2011-12 is forecast to be around £3 billion, in October 2009 the Treasury estimated that if airlines paid fuel duty at the same rate as motorists, and if VAT was applied to air tickets, the Government would raise an additional £10 billion per year – an effective subsidy which, given increases in VAT and in fuel costs, is probably now closer to £12 billion.

These airports have the cheek to demand yet more special treatment, when the aviation industry is already being feather-bedded by the Treasury (i.e. every tax payer in the country, fliers and non-fliers alike) to the tune of £10bn or more.

Coming hot on the heels of Manston's bid to get £600k of public money as a sweetener to pay an airline to use the airport, this is just shameless greed. It is also another clear sign that Manston's management and owners are in denial about a blindingly obvious fact: the airport is not commercially viable.

Manston calls for 'congestion charge' on bigger airports

Special pleading, spineless bleating

Bosses at Manston are calling on the government to implement a "congestion charge" at London's main airports because of the "devastating impact" of Air Passenger Duty (APD) on smaller airports. The proposal is part of Manston's submission to the government's consultation on APD, which it is estimated could cost the public, visitors and businesses an extra £1bn a year.

Manston is arguing that the tax will severely hit regional economies, and in particular the tourism sector, by hindering the growth of regional airports. As a result Manston is proposing that the most effective way to deliver the government's "Better not Bigger" initiative is to set APD levels at a lower level for uncongested regional airports with significant available capacity to help alleviate congestion and improve the passenger experience at the main London airports. Charles Buchanan, chief executive of Manston Airport, said:

"We believe the government should follow other European countries and scrap APD as the tax is making the UK less attractive to international visitors and also holding back the growth of regional airports. The government should provide economic incentives to encourage airlines to move out of the congested London airports, and importantly to make better use of those where capacity is available. If passengers and airlines want to fly out of airports which are congested then they should pay a premium for doing so, just as motorists pay a premium to drive in central London."

The top rate of APD is currently eight times the average of other countries in Europe and the Office for Budget Responsibility has forecast that APD will raise £17.5bn from 2010-11 to 2015-16 for the government. In countries such as Belgium, Netherlands, Denmark and Malta, APD has been scrapped due to its detrimental impact on tourism and wider economies in those countries, and it may be scrapped next year in Germany.

Manston has joined a partnership of other regional airports, including Birmingham, Bournemouth, Bristol, Durham Tees Valley, East Midlands, Humberside, Leeds Bradford, Liverpool, Manchester, Newcastle, Prestwick, and Robin Hood, and obtained legal advice on whether a new differential tax regime can be introduced. The UK aviation industry is also preparing itself for a "double tax whammy" with the impending introduction of the European Emissions Trading Scheme (EU ETS), which, in addition to the APD regimes, means it is disadvantaged further against other European airports. Mr Buchanan said:

"With Air Passenger Duty in the UK now at a level far higher than anywhere else in the world, combined with record fuel prices, continuing weak economic conditions and the impending introduction of the EU ETS in 2012, it is making it difficult to sustain our existing air services and very challenging to attract new airlines and services to our airport. This is not only bad news for our airport and passengers, it is also bad news for jobs, inward investment, tourism and wealth creation in Kent. Under the right economic conditions Manston is uniquely positioned to provide air services for Kent and London once the already improving surface access infrastructure is in place."

The industry is arguing that regional airports across the UK, such as Manston, will be disproportionately affected by APD, at a time when they are best placed to assist the Government fulfill its commitment to constrain the growth of the congested London airports by not building additional runways at London Heathrow, Gatwick and Stansted.

Regional airports argue that they do not have the luxury or benefit of having a large proportion of business travellers or wealthy passengers with a propensity to fly, that the main London airports such as Heathrow and Gatwick enjoy. Without decisive action, they say, the gap between the largest London airports and those in the regions will continue to increase.

kentonline 20th Jun 2011

Manston boss backs campaign for fair air fuel

A Kent airport boss has backed a campaign to stop holidays becoming even more expensive for jet-setting Brits. Charles Buchanan, chief executive of Kent International Airport, wants the government to ground any plans for a further rise in air passenger duty in next month's Budget. British holidaymakers already pay more flight tax than anywhere else in Europe.

According to the travel organisation ABTA, a family of four flying from the UK to Australia pay £340 in flight tax, compared to just £11 for an Irish family. It says the government has increased air passenger duty by 2,600% since 1994. Mr Buchanan said:

"If someone from overseas wants to visit the UK and they're confronted with flight taxes that are eight times higher than they are in places like France or Germany, it's clearly not going to help attract those people into this country. Tourism is such a vital part of the economy. We have the Open golf championship this year and the Olympic Games in 2012, not to mention the whole range of visitor attractions, hotels, bars and restaurants that depend on income from tourists, so bringing more visitors into the area can only be a good thing."

According to ABTA, the government will earn £2.2 billion from air passenger duty paid by holidaymakers and business travellers in 2011. This could increase to £3.6 billion within five years. Mr Buchanan has called for a "level playing field" but warned:

"We don't think the government will reduce air passenger duty in the current economic climate, so our campaign won't make family holidays any cheaper. However, it could stop them becoming more expensive."

ABTA's Fair Tax on Flying campaign, launched earlier this month, already has more than 1,000 supporters on Facebook. The campaign is backed by major airlines including British Airways and Virgin Atlantic, travel agencies such as Thomas Cook and TUI Travel and airports operator BAA.

kentonline 14th Mar 2011