Chancellor urged to close APD loopholes

Worst polluters only paying half the rate of Air Passenger Duty – or none at all

Stop Stansted Expansion (SSE) has written to Chancellor Gordon Brown to draw his attention to two major loopholes in Air Passenger Duty (APD) whereby the most polluting flights are only subject to half the normal rate of APD and in some instances are totally exempt.

The timing of the letter coincides with an attack in the Financial Times by EasyJet founder Stelios Haji-Ioannou who accuses decision makers and executives of profligacy in the use of private jets at the expense of both the environment and shareholder interests.

The Chancellor recently doubled APD citing the need to address the increasing environmental damage caused by aviation which is the fastest growing contributor to climate change. However, two of the worst environmental offenders are benefiting from loopholes in the APD regulations.

The first loophole applies to the ‘all business-class’ transatlantic services that have recently started up, for example those at Stansted operated by US airlines Eos and Maxjet, which are only liable for the economy rate of APD of £40 rather than the normal APD rate of £80 for first and business class travel. This is because of a loophole in the regulations whereby the lowest class of travel on an aircraft qualifies for the reduced rate of APD. Because there is only one class of travel on Eos and Maxjet flights – premium business class – all passengers qualify for the reduced rate.

Meanwhile, an even more glaring anomaly exists in relation to business and private jets. These are totally exempt from APD because the tax only applies to aircraft with more than 20 seats. Thus the super-rich jetting off to the south of France or on a transatlantic jaunt pay no APD whatsoever. Stansted handled almost 10,000 business and private flights last year – around 200 a week.

Brian Ross, SSE Economics Adviser said: “Even with the recent increase in APD, aviation still only pays less than a quarter of its environmental costs. The Government tries to justify this by saying that it doesn’t want to price poor people off planes but here we have the Government allowing a 50 percent reduction in APD on these luxury transatlantic flights and giving a total exemption to the super rich with their private jets. There can be no justification for this whatsoever if the Government is serious about tackling climate change.”

Eos and Maxjet both began operating premium business class transatlantic services from Stansted towards the end of 2005 and fly to New York, Las Vegas and Washington DC. Eos uses Boeing 757 aircraft with only 48 luxury seats – or “suites” as Eos prefers to describe them – on a plane built for 220 seats, as Eos states in its own advertising. Eos is filling on average only 30 seats per trip between Stansted and New York, at a standard fare of about £3,600 return.

Each Eos passenger produces the equivalent of nine tonnes of carbon dioxide (CO2) on a return trip to New York – more than three times as much as a passenger travelling with British Airways from Heathrow to New York. The environmental damage caused by an Eos aircraft on a return flight to New York has a cost of about £13,800 which compares to only £1,200 collected in APD based on its average of 30 passengers. The environmental cost is calculated on the basis of £51 per tonne of CO2 in line with the assessment contained in the Stern Report.

Maxjet uses Boeing 767-200 aircraft with 102 seats on a plane built for up to 255 seats. Maxjet has averaged just 43 passengers per trip on its Las Vegas route since the service began with the result that each Maxjet passenger has been responsible for the equivalent of 13 tonnes of CO2 emissions on a round trip to Las Vegas. This equates to an environmental cost of £28,458 but only £1,720 is paid in APD, which is described by the Government as an environmental tax.

In writing to the Chancellor urging him to deal with these loopholes in his March Budget, SSE has provided detailed calculations based on the European Environment Agency’s official tables for aircraft fuel consumption, standard air routing distances between airports and standard conversion factors for converting aircraft fuel consumption to CO2 emissions.

SSE is also writing to the Chairmen of the FTSE 100 companies drawing their attention to the far greater environmental damage caused by passengers travelling with premium class only airlines asking them to take account of this in their company air travel policies.

SSE has been unable to obtain details of the journeys made by business and private jets because such information is not publicly available. It is therefore not possible to produce similar analysis in this area. Nevertheless, SSE has urged the Chancellor to close the loophole whereby these aircraft are presently completely exempt from APD.

NOTES

• A copy of SSE’s letter and spreadsheet analysis sent to the Chancellor is available on request.
• Current APD rates are:
• • £10 – economy/tourist class domestic and short haul flights
  • £20 – business /first class domestic and short haul flights
  • £40 – economy/tourist class non-EU and long haul flights
  • £80 – business /first class non-EU and long haul flights
• The above rates became applicable on 1 February 2007. (Note that APD is payable on the outward leg of an international journey only)
• The precise number of business and private flights (including air taxis) at Stansted last year was 9,929 (Source: CAA airport statistics: www.caa.co.uk/)
• Eos (www.eosairlines.com) uses Boeing 757 2Q8 aircraft which are also used by a number of other airlines, for example, Finnair (218 seats) and Thomas Cook (235 seats).
• Using route analysis data published by the CAA, SSE has tracked the monthly number of Eos and Maxjet passengers and flights from Stansted since services started in October/November 2005.
• Distances between airports have been calculated using standard ‘great circle’ distances, i.e. allowing for the curviture of the earth. Conversion factor for aviation fuel to CO2 is 3.15 tonnes of CO2 per tonne of kerosene.
• The Stern Report published by HM Treasury on 31 October 2006 assesses the social cost of carbon at $85 per tonne of CO2 at year 2000 prices. [Executive Summary, page xvi]. This converts to £51 per tonne of CO2 at current prices.