Author: By Nick Clark
Ryanair, which currently runs 40 aircraft from Stansted, its main London hub, will run just 24 planes from October, leading to a 30 per cent reduction in the number of weekly flights.
It is the latest airline to cut its schedules, increasing the pressure from the aviation and tourist industries on the Chancellor to review the controversial air passenger duty (APD).
Belgium, Holland, Greece and Spain have all reduced or scrapped similar taxes to boost tourism during the recession. Yesterday Ryanair’s arch-rival easyJet joined in the attack, branding the tax “certifiably bonkers”.
The British Air Transport Association (Bata) has already approached the Government over the issue as many of its members have warned the measure could have a disastrous impact on an industry already suffering heavily from the effects of the recession. An industry analyst, Rigas Doganis, said that the decline of the aviation industry had been “absolutely frightening”.
However, industry sources believe that while a £1 rise in the tax in November appears to be a “fait accompli”, they are concentrating their efforts on stopping a doubling of the tax, due to come in next year.
APD first came into effect in 1994 but was overhauled in the pre-Budget report last November. The tax is in four bands, dependent on how far the passenger flies. In Europe, there is currently a flat £10 fee for passengers on shorthaul economy flights, rising to £40 to fly further. This will rise to £22 and £90 from November next year.
The Government introduced it as a green tax, which easyJet rejected yesterday. “As an environmental tax it is stupidity itself as it is a flat rate. A passenger flying on the most environmentally friendly plane will pay the same as one on a dirty old banger.”
Virgin Atlantic also came out against the tax, and has started printing anti-APD messages on its e-tickets. Sir Richard Branson called it “one of the most unjust taxes out there” on a website launched railing against APD. He said there was “not a shred of evidence to suggest the £2bn-plus currently raised is going towards environmental or sustainable projects”.
A spokeswoman for BA said: “It is not made plausible by the environmental argument. We believe that aviation should be placed within the system of emissions trading, rather than hit with a crude tax such as this.”
A spokeswoman for the Association of British Travel Agents (Abta) said: “This will have an impact on the tourism trade in this country, especially hitting long-haul flights. However, as Ryanair have pointed out, shorthaul flights will not go unaffected.
“It will also hit those with friends and family abroad, especially those with family in places such as the Caribbean. While we may think the Caribbean is a place for the rich, most travel there is carried out by people visiting family members, so placing it in a very high band will hit them hard. The economies of many countries reliant on tourism will also be hit by this,” she warned.
The decision to cut 10 routes and reduce 30 more and reduce the aircraft operating from Stansted from 40 to 24 ? a 40 per cent drop in capacity ? will see 2.5 million fewer Ryanair passengers travel from Stansted between October and March. A spokeswoman for Ryanair said 2,500 local jobs could be hit as a result.
Ryanair’s outspoken chief executive Michael O’Leary denied the move was driven by the recession, pointing to its growth in passenger numbers in June over the previous year.
He turned both barrels on the UK Government. The airline has already called on the Prime Minister to scrap the Air Passenger Duty tax, which will go from £10 to £11 in November, as well as pushing for lower fees at BAA airports. “The capacity cutback at Stansted shows just how much Gordon Brown’s tourist tax is damaging London and UK tourism and the British economy generally,” Mr O’Leary said.
He added that Air Passenger Duty is not paid by cargo aircraft or by transfer passengers. “So someone taking a flight to Tokyo will be paying a huge tax, that a transferred passenger sitting next to them has avoided.”Mr O’Leary said: “In recent months the Belgian, Dutch, Greek and Spanish governments have all scrapped tourist taxes or reduced airport charges to zero in order to stimulate tourism.
“Sadly, UK traffic and tourism continue to collapse while Ryanair continues to grow traffic rapidly in those countries which welcome tourists instead of taxing them.”
Details of which routes will be cut have not yet been disclosed. This is the second year Ryanair has slashed the service during the winter. Last year, the airline cut its capacity from Stansted from 36 planes to 28, blaming BAA’s charges and the oil price.
Ryanair has seen staggering growth since it was set up in 1985 by the Ryan family with one 15-seater aircraft. The total number of passengers is expected to hit 67 million this year and it hopes to hit 100 million by 2012. However, last month Mr O’Leary said the airline had stopped expansion in Britain, and this year is expected to see the first ever falls in UK customer traffic. The group also had its first ever loss this year, although the hit came from a huge writedown on its stake in Aer Lingus. The group plunged to a ?181m pre-tax loss from a profit of ?439m the previous year.
British Airways, which is feeling the full force of the recession, is set to resume talks with trade union officials today over plans to cut thousands of jobs and freeze pay. A GMB union spokesman said that while some progress had been made, “we do not expect the talks to conclude until later in August”.
Gert Zonneveld, an airline analyst at Panmure Gordon, said: “It is a considerable cut in capacity. The issues of tax and airport charges are a huge concern to the industry.”
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