APRIL 27TH, 2016

A4E calls for the abolishment of passenger taxes to boost economic growth and create more jobs in Europe

- Norway and Italy should learn from the Netherlands and Ireland.
- Joint aviation briefing at the European Parliament with MEP Ramon Tremosa i Balcells, Norwegian’s Bjørn Kjos and Ville Iho from Finnair.

Today, Airlines for Europe (A4E) and executives from its member airlines participated in an aviation briefing organised by MEP Ramon Tremosa i Balcells.

Since its launch in January A4E has addressed the issue of new and rising aviation taxes in Europe, as one of its key policy priorities. Instead of preventing economic growth and job creation by imposing unreasonable taxes, European governments should create a supportive regulatory environment.

“By weakening an enabler of economic activity, governments are shooting themselves in the foot: they only see the short term budgetary gains but ignore the larger and long-term impact on economic activity. By removing passenger taxes governments would end up as net beneficiaries due to the increased revenues from VAT and other taxes, as well as higher passenger numbers”, said Thomas Reynaert, Managing Director of A4E.

“As an economics professor before being a politician, I believe that what is important for airlines, like any other business, is to have full transparency and predictability on taxation decisions at Member States level. I ask the European Commission to publicly list these taxes and levies and to examine their economic impact. The EU should be much more active in the coordination of Member States tax policies”, declared Ramon Tremosa i Balcells, Member of the European Parliament from Barcelona.

Experience and economic analysis both show that removing taxes is beneficial, e.g. the Dutch government’s removal of its ticket tax in 2009 led to strong growth in passengers; the Irish government’s removal of traffic tax in April 2014 led to extensive traffic growth at Irish airports and an 8% increase in tourism last year while the number of Northern Ireland residents flying from Dublin increased by 52% in the first year; economic analysis by PwC shows removing UK Air Passenger Duty (APD) would boost British GDP by 1.7% and create 60,000 new jobs by 2020.

Scotland is already cutting APD by 50% as a precursor to getting rid of it entirely. The tax is said to cost Scotland £200m a year in lost tourism alone. In the case of Scotland, slashing APD will add GBP 1 billion (EUR 1.3 billion) to the Scottish economy and create 4,000 jobs, according to studies from Edinburgh airport. It adds that by 2020 (if not reduced), APD would cost the Scottish economy up to GBP 68 million (EUR 88 million) in lost tourism expenditure every year.

The Norwegian Government’s planned air transportation tax equivalent to NOK 80 (EUR 8.5), set to be put in place this summer on departing passengers for both domestic and international flights, will have a harmful impact on Norway’s economy and its airline industry. According to IATA analysis, the tax risks reducing the overall demand for air transport by 5%, which equals roughly 1.2 million passengers per year. In addition, the tax would lead to a reduction in the direct and indirect output of the aviation sector by an estimated NOK 1.4 billion (EUR 150 million).

“We encourage European legislators to learn from prior experiences. The Dutch government abolished its aviation tax after just one year. It recognised the detrimental effect its tax was having on the wider economy as travellers bypassed Dutch airports and airlines in favour of cheaper options across the border in Germany or Belgium”, stated Norwegian CEO Bjørn Kjos.

Earlier this year the Italian government increased the taxes on passengers charged at Italian airports by €2.50 – literally overnight and with immediate effect. Some A4E member airlines have already taken action and positioned their airplanes at airports outside of Italy which is damaging the Italian economy and puts the tourism sector at risk.

“The imposition of such taxes impacts airlines’ decisions to operate from a specific country or region due to the high price elasticity of consumers. This subsequently affects the offer to consumers who are faced with a decrease in operations and a reduction of connectivity which has a shattering effect on the economy”, said Ville Iho, Finnair’s Deputy CEO.

A4E supports the first priority of the Juncker Commission for the EU which is boosting jobs, growth and investment. Therefore the EU needs to ensure that these taxes are lifted, leading to more travel, more investment, more trade and ultimately increased job and growth. This is particularly true for the parts of Europe affected by youth unemployment. In these countries, lowering the cost of air access to would boost tourism and economic activity generally, with a direct positive spill-over on job creation.

Air travel taxes threaten tourism, jobs and the ability to do business in Europe. A4E expects the European Commission to take a public stance to encourage national measures which support aviation activity together with tourism and business activity.