Importance of aviation in a time of austerity

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ePolitix.com speaks to Simon Buck, chief executive of the British Air Transport Association, about aviation taxes, the importance of aviation to the economy, and the volcanic ash crisis earlier this year.

Can you tell me a little bit about the work of the British Air Transport Association (BATA)?

The British Air Transport Association (BATA) is the trade body for UK-registered airlines. We have ten members covering all sectors of the airline industry, including freight, charter, low-fare, regional and full service. BATA members represent about 80 per cent of UK airline output, about 70 per cent of the UK commercial airliner fleet, and employ around 71,000 people.

In a time of austerity, why is the aviation industry important to the UK?

Aviation and its supply chain play a hugely important economic role to the UK, contributing over £18bn to GDP annually and supporting almost a quarter of a million jobs. This represents around 1.5 per cent of the UK economy. Over 218 million people passed through UK airports last year as did over 2 million tonnes of freight.

Good air links are especially important to an island trading nation such as the UK, for our international competitiveness and connectivity with the rest of the world. Measured by value, over 55 per cent of UK exports of manufactured goods to countries beyond the EU are transported by air.

The cancellation of the third runway at Heathrow and the ruling-out of any additional runways at Gatwick and Stansted must have been a bitter pill to swallow for the industry. Hasn't the airline industry now lost the argument about ever-increasing growth?

The Prime Minister recently acknowledged that tourism is the third-highest export earner for the UK behind chemicals and financial services and expressed an aspiration to grow our tourism industry further to attract visitors from the newly emerging economies of the Far East.

Over 75 per cent of inbound tourists visit the UK by air. Yet we face a situation where we have a severe shortage of airport capacity in the south-east of England where we have our capital city and where many foreign visitors wish to visit.

We are now in position where London serves, for example, just three cities in China compared to the seven served by Frankfurt. While our near European competitors have been expanding their hub airports dramatically over the last twenty years or so, the UK has only built one new runway in the southeast since the Second World War. Due to the ban on construction imposed by Britain's coalition government, no new runway is likely in the next twenty years at least. In just the next ten years, China, for example, is expected to build ninety-seven new airports. We will not therefore be able to attract the new business that our global competitors will.

What do you say to those who argue that aviation is under-taxed and effectively subsidised, especially when compared to other forms of transport?

Aviation more than meets its assessed environmental costs through the imposition of Air Passenger Duty (APD). The rate of APD has more than doubled in the last ten years to become the heaviest tax on flying in the world, raising approximately £2bn a year. No other form of public transport is required to pay such a tax but, unlike the huge public subsidies amounting to many billions of pounds per year received by rail for example, aviation pays for its own airport infrastructure and regulatory costs. Despite this, APD will be significantly increased again on November 1 and HM Treasury is forecasting an almost doubling of receipts over the next five years. APD currently raises well over twice as much as the new tax on banks known as the bank levy and more than that raised from duties on alcoholic spirits. This level of taxation is disproportionate and potentially damaging to UK competitiveness. It also places jobs and connectivity at risk, especially in the regions where some routes may become less economically viable. As a result of the recession, passenger numbers at UK airports have fallen in the last three years and the loss of routes and airlines has harmed local and regional economies where their ability to access markets has been reduced. Ever higher taxation will do nothing to help reverse this situation.

Aviation is a growing contributor to climate change. What are BATA and your members doing both to address this situation and educate people about your efforts?

The UK aviation industry recognises its contribution to climate change where its emissions account for around 6 per cent of UK CO2 emissions. As part of a strategy to tackle the challenge, all sectors of the industry came together to set up the Sustainable Aviation initiative in 2005. This long term strategy sets out the collective approach of UK aviation to create a sustainable future for the industry. At the end of 2008, Sustainable Aviation published its Roadmap which showed that emissions of CO2 from the sector can be reduced to 2000 levels by 2050. Governments also have an important role to play in this internationally and while we welcome the recent steps that have been taken, we must not see the UK industry and economic competitiveness put at a disadvantage through well-meaning but misguided political intent where the UK is somehow meant to set an example to the rest of the world.

APD is a very blunt economic instrument which does not incentivise efficiency within airlines, where every incentive to be as efficient and competitive as possible already exists. We therefore believe APD should be phased out once aviation becomes part of the EU-wide Emissions Trading Scheme in 2012.

What lessons have been learnt from the volcanic ash crisis earlier this year that closed UK airspace for almost a week?

The situation we faced earlier this year where much of EU airspace was closed for the best part of a week served to demonstrate to most people just how important aviation is to our everyday lives. Supermarket shelves began to run short of foodstuffs and goods that many of us take for granted and our manufacturing industry faced closure due to its inability to access vital components normally delivered by air.

During the crisis, airlines worked tirelessly to repatriate customers stranded overseas and met the cost of their accommodation and welfare. The situation was unprecedented of course and, inevitably, many people faced a lot of inconvenience. I think the whole industry, airlines, airports, airspace providers, aircraft engine manufacturers and Europe's governments have all learnt an enormous amount since then, particularly the need to look at greater co-ordination across Europe in dealing with such a problem should it ever happen again.

If we do ever face a similar situation again – and sincerely hope we do not – we should all be a lot more prepared as a result of what we experienced in April.