APD ‘freeze’ in the budget

22 November 2017

So it has just been announced that short-haul Air Passenger Duty (APD) rates for 2019-20 will remain frozen as they have been since 2012. The long-haul rate for economy passengers will also be frozen at the 2018-19 level. However, rates for premium economy, business and first class will increase by £16 and for those travelling by private jet by £47.

There has been a strong lobby arguing for a reduction in APD on the basis that existing rates were already excessive and were impacting on the demand for travel – given that passenger numbers have continued to increase and that APD generates over £3 billion per annum this was always going to be a difficult argument to win against a government looking to secure its position by seeking to rein back some austerity measures.

The question is whether the further increase for APD on higher end travel impact on the business travel on which so much hope is apparently being placed post Brexit; the argument being that face to face meetings are still preferred by overseas customers and increased APD, together with the lack of UK runway capacity claimed by the airports and airlines, will impact on this. In reality will anyone looking to secure new business and travelling business class actually be deterred by the increase – unlikely. Will someone traveling first class or by private jet even care – again unlikely.

There may be some impact on travellers looking to upgrade from economy to premium economy but the effects will have to be seen. 

Overall, the treasury believes it will generate an additional £25m per annum under the changes.  

It is a sad observation that most taxes are eventually just accepted and less controversial than for example a fuel levy; so increased APD is unlikely to be the key factor in decision making for travellers. However, given the tightening of belts, as a result of the uncertainty in the run up to Brexit, it certainly will not help.

Contact us 

For further infromation, please get in touch with Rajeev Shaunak, Partner and Head of Travel and Tourism sector.

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