(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:

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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.

KCC's empty begging bowl

In the middle of last year, the Government (in the form of the Department for Business Innovation and Skills - BIS) launched the Regional Growth Fund (RGF). The RGF aims to "support projects and programmes that lever private sector investment creating economic growth and sustainable employment. It aims particularly to help those areas and communities currently dependent on the public sector to make the transition to sustainable private sector-led growth and prosperity".

Across the length and breadth of our proud nation, there was a cacophony of snorts and oinks as snouts were pressed to the trough, greedy for their share of the £1.4 billion on offer. KCC was there, looking for a handout to support their crackpot proposal for a Parkway station at Manston, and some free money for the airport. Here's why they failed:

Thanks to the Freedom of Information Act, we can now see what KCC were doing on our behalf (if they had their way, this would still be secret). They were after a total of £10.8 million from the Regional Growth Fund, which breaks down thus:

• £7.7 million towards the capital cost of the Thanet Parkway Station;
• £2 million towards the capital cost of the St Pancras-Ramsgate Journey Time Improvement Scheme (Phase 1);
• £600,000 towards the underwriting of the proposed [censored] air service from Manston (Kent International) Airport to [censored] for three years from summer 2012; and,
• £500,000 towards the delivery of the first phase of the Manston (Kent International) Airport Master Plan, including the training and employment of 11 Airport Fire and Rescue personnel, 9 Airport Security personnel, and 3 Customer Service personnel on a full-time, permanent basis.

The balance of the cost of the Parkway station would be met by Infratil (£560,000) and by borrowing (£1.96m).

The £2m would achieve a journey reduction time of 2 minutes. (Time really is money!)

The £600,000 would be a, er, "sweetener" to persuade an unnamed airline to use the airport.

The £500,000 would be, er, paying Manston to be an airport, and thus returning to them most of the £560k they would have stumped up towards the cost of the station. Nice!

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The RGF application form clearly states:

The Regional Growth Fund seeks to encourage sustainable private sector-led growth.

It appears KCC didn't read the RGF guidelines very carefully, as the application is littered with bullets, aimed squarely at their own feet.

The operation of an air service from Manston (Kent International) Airport to a European hub would be unlikely to happen at all without the Airport subsidising the airline operation. In the current economic environment, the Airport, operating as it does at an annual loss, is not in a position to provide that subsidy to the level that would sufficiently encourage the airline to commence operations.

Translation: No airline can be persuaded to operate out of Manston without being paid. The airport is skint and getting poorer, so can't afford the sweetener. Bang!

The alternative funding sources for underwriting the proposed air service from Manston (Kent International) Airport to [censored] are principally either from the airline, the Airport, or external third parties. In this case, the airline would already be making a contribution through the risk level it would take in covering the operating costs of the service. It should be remembered that airlines have completely mobile assets which they are able to deploy at a wide range of airports on a variety of routes. The support that an airport and its community are able to provide towards the start-up costs and risks, is regularly influential in their route development decisions.

Translation: The airport can't afford to pay the airline, and the airline thinks just being there is risk enough. Airlines are flighty, and need to be lured with cash. Bang!

Manston Airport is operating at a loss, and has done so for many years. Whilst Infratil is prepared to invest in the development of the Airport’s infrastructure, and to cover the existing level of losses together with a contribution to the additional costs for the first years of a new service, it would not be prepared to cover 100% of the route support costs for this new route. In addition, the commitment of the local community that would be illustrated by a successful funding bid will be viewed by the airline as a significant statement of support for the route.

Translation: The airport really is skint, the owners are tired of seeing their money disappear, and aren't even prepared to take a punt on this new airline. Bang!

The RGF application form goes on to say:

In order to ensure good value for money for the taxpayer, it is important that the additional economic benefits associated with supporting a project exceed the costs of Government support.

At this point, KCC reloads and blunders on:

While the Thanet Parkway Station will not require ongoing public support once it is operational, as revenues are forecast to exceed operating costs, the initial capital cost results in the scheme not being commercially viable, namely financially positive. The introduction of twice-daily direct air services between Manston (Kent International) Airport and [censored] will create 23 additional direct jobs at Manston Airport. Along with the three jobs created by the opening of Thanet Parkway station, there are estimated to be 26 direct jobs.

To save your calculator batteries, that's £415,384 per job generated by the £10.8 million. Remember that bit at the beginning of this post, about RGF wanting to help make the transition from public sector to private sector jobs? KCC's application was looking for a level of public subsidy that would have embarrassed the British Leyland of old.
 
In the over-crowded sweepstake that is the Grand National economy, the Government decided not to back this particular three-legged donkey. Quelle surprise!

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Dear Reader, you can download your copy of the once-secret KCC Bid Document below, and if you can deduce (or already know) the identities of the airline, or the European hub airport, that are painstakingly blacked out throughout the document, do let me know. Thank you.

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Cosmos pulls out of Manston as US flight plans grounded

Package holiday giant Cosmos has this morning confirmed it has pulled the plug on its planned flights to the US from Thanet's Manston Airport. The tour giant, which promised to make the Thanet airport a major departure point for flights to the United States, has failed to sell enough seats both in the UK and US.

It is understood the flights to and from Virginia had sold just 600 tickets in the UK - and a mere 200 in the US. That represents just ten per cent of the tickets available for the planned weekly service. It is a blow to Kent County Council which backed the operator as soon as it showed interest in using the airport and forged new links with the state of Virginia, in the east of the US, south of Washington. Kent County Council leader, Paul Carter, said:

"The direct flights project was just one part of our initiatives to regenerate East Kent. It was a calculated risk that had significant potential and could have delivered major benefits for the region. Enormous efforts have been made on both sides of the Atlantic to promote the flights. But, despite putting back the deadline for decision three times, in order to see if the market would respond and pick up, sales have failed to reach a critical mass. In the absence of any other organisation prepared to share the financial risk of continuing with the project, it would not be prudent or viable to invest public money in the venture. We will now redouble our efforts to stimulate inward investment and economic regeneration."                

The council is believed to have already sunk in £100,000 into the project of council tax-payers money. The county council lost a similar figure after backing Irish airline EUJet which started operating out of Manston two years ago but failed to make the project work. Cosmos began promoting its flights to Virginia last October and flights were expected to begin from May this year. But today it was impossible to book flights out of Manston via the tour operator's web site. All monies will be refunded to travellers who have already booked on the service or an alternative offered.

YourCanterbury 28th Feb 2007

Direct flights to USA from Manston next year

Direct flights transatlantic flights will start from Kent International Airport next year. Tour operator Cosmos and its sister airline, Monarch, will start direct transatlantic flights between Manston in Thanet and Virginia next year. The weekly charter flights will be the first direct passenger link between the United States and Kent and will initially operate during the spring and summer. The move follows a feasibility study carried out by air industry consultants.

Norfolk International Airport in Virginia is contributing half the start up costs – £400,000 – with Kent County Council and a coalition of investors including SEEDA, Infratil Airports Europe Ltd, Kent Attractions LLP, East Kent Partnership, Thanet District Council, Canterbury City Council and Gravesham Borough Council providing the rest. KCC leader Paul Carter said,

"The 400th anniversary of the founding of the colony of Jamestown in Virginia is coming up next year with strong Kent links; Dover Cruise Terminal is going from strength to strength. There will never be a better time to establish a direct air link between Kent and the States to help boost Kent International Airport, our tourism industry and in particular hard pressed East Kent."

Terry Williamson, Cosmos Holidays managing director, said:

"It is indeed an exciting development for both the Kent International area and us. Whilst relatively unknown to many in the UK, Virginia offers a huge array of attractions and places of interest and given the 400th anniversary celebrations, it is an excellent time to launch this service."

YourMaidstone 23rd Jul 2006

Kent's investment in US event "value for money"

What were they thinking?

Kent County Council is to spend £225,000 as a joint sponsor of a major cultural festival in America, it has emerged. The council has agreed to become a key financial backer of the Smithsonian Folklife Festival in Washington in 2007 as part of a drive to boost the number of American tourists coming to Kent. Council chiefs say the investment represents “value for money” and could eventually deliver a £50 million fillip to the county’s tourism industry.

While KCC’s involvement with the festival in 2007 has been public knowledge for some time, its financial investment has not previously been disclosed. Details were released to the Kent Messenger Group in response to a request we made under the Freedom of Information Act. It has also emerged that KCC is separately spending a further £265,000 developing its links with Virginia. KCC deputy leader Cllr Alex King, who is spearheading the council’s participation in the festival, said:

“The potential is very significant in terms of the impact on the Kent economy. What we have to do is promote Kent in a way which promotes the county elsewhere coherently and effectively. We have a very strong partnership with Virginia, which will lead to two-way tourism. In my view – and it is a conservative estimate – we can bring £50m into the Kent economy and if we get it right, the impact will last for a lot longer.”

But he conceded that KCC could not be assured of a return on its investment.

“There are no guarantees in this. Sometimes, you have to take a punt. But in two weeks, one million people visit the festival and it is the biggest event of its kind in North America. It is very good value for money.”

KCC says its presence will give it a “shop window” to promote the county to potential visitors, with exhibits and performances by Kent-based artists, craftsmen, food producers and musicians. Cllr King said some of the £225,000 would be used to meet the costs of groups or individuals participating but commercial enterprises would have to pay their own way.

“I am not funding anything which will pay for itself.”

The decision to become involved in the festival is a result of Kent’s efforts to exploit its historic links with the state of Virginia. Those links go back 400 years, when many of the first settlers in Virginia came from the county.

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What is the Smithsonian Festival?

The free 10-day festival, founded in 1967, promotes itself as a global “cultural celebration” focusing on showcasing, through exhibits and performances, traditional arts and crafts from America and elsewhere. It is held outdoors on the National Mall at Capitol Hill in Washington DC and is visited by more than one million people.

Kent County Council’s financial backing for the Smithsonian Festival is not the only money being spent on its efforts to forge closer ties to America. It has allocated £265,000 to a project to “identify and develop links between Kent and the Commonwealth of Virginia, USA”.

A further £50,000 is being spent on a marketing campaign “to position Kent as a destination of choice for US visitors”. Meanwhile, consultants have been paid £50,000 to examine if direct transatlantic flights between Manston Airport in Thanet and the USA would be commercially viable.

The money is coming from the Kent Regeneration Fund, which is worth £1.5million a year. The fund is used to allocate grants to initiatives or projects that could help boost the Kent economy. It was used by KCC to make a £121,000 investment in EUJet, the low-cost air operator based at Ramsgate’s Manston Airport. The company went into administration last year and KCC lost its money.

While the fund is public money, Cllr King said it did not add to the burden on taxpayers as it was generated from the windfall resulting from the development at Kings Hill.

kentonline 13th Jan 2006

New era dawns at Kent airport

Kent is finally joined by air to the rest of Europe. EUjet’s new low cost services got off to a flying start yesterday when the first flight - a Fokker-100 - took off from Kent International Airport at Manston, at 6.15am for Dublin. It marked the start of a service that is set to boost east Kent and turn Kent at last into an aviation hub. It has already brought 300 new jobs to Thanet and there could be 100 more over the next 18 months.

Flights on day one were 75 per cent full, with more than 600 passengers flying to Amsterdam, Copenhagen, Dublin, Nice and Girona. A smaller number flew back to Manston, reflecting the lack of marketing effort by EUjet at the destination airports. By the end of the year, EUjet will be flying to 22 destinations including Prague, Madrid, Milan, Palma, Malaga, Turin, Edinburgh and Manchester.

Airline and airport bosses were delighted with how smoothly things had gone. P.J.McGoldrick, EUjet chief executive, admitted he had been nervous just before take-off. He has invested millions of pounds of his own money in the venture. But the performance had exceeded his expectations. He said:

“We have had an incredible start to what I believe to be an exciting development, not just for EUjet but also for Kent and this airport.”

Airport staff had turned the aircraft around in 26 minutes. Airport staff also aim to get luggage from aircraft to carrousel within eight minutes of the aircraft’s arrival on the terminal apron.

Kent County Council has invested £100,000 in EUjet. Councillor Alex King, Cabinet Member for Regeneration, said it was a gamble that was well worth taking. September 1 was a turning point that would mark the transition of east Kent from the difficulties of the Eighties and Nineties to a successful economy of the early 21st-century.

“This is the first public demonstration of Kent becoming the Go To county.”

PlaneStation, the airport owner, has invested £3million in preparing KIA for the launch of EUjet. One hundred extra staff have been taken on, including security experts. Alastair Robertson, airport chief, said:

“I would anticipate that we will be employing at least an additional 100 people in the next 12-18 months.”

He added that substantial investment had been made in the latest hi-tec and sensitive x-ray equipment. Councillor Jeff Kirkpatrick, chairman of Thanet Council, welcomed the launch of EUjet:

“It is just a great day for everyone here in Thanet. As a bonus to the residents, we will enjoy the privilege of just being able to pop down here and fly away. Things are really happening and today is the day it takes off for real.”

He added that residents should not be concerned about noise because every step had been taken to minimise it. There was no night flying and EUjet is using “extremely quiet aircraft”. EUjet may be the first airline to use KIA but it is unlikely to be the last. Airport chiefs are in talks with two other airlines interested in operating to other destinations. And charter services to Florida are expected to start next year.

kentonline 1st Sep 2004