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Aviation Policy Options for Scotland, October 2013
Scotland possesses five major airports – Edinburgh, Glasgow, Aberdeen, Prestwick and Inverness – and many other smaller centres. The principal problem is that of limited European connections and very few long haul flights to international destinations. Compared to other small European countries, we are poorly served. In essence, our long haul flights centre on London Heathrow, Gatwick and Amsterdam and increasingly Dublin. This results in longer, broken journeys for those travelling overseas, greater inconvenience, longer journeys and increasing costs, producing economic losses through impacting on tourism, business and attraction of incoming industries (who are put off by poor air communications).
Why is this so?
To understand why we have so few direct flights, we need to understand the history of airport development in the UK. Initially BAA (a nationalised company run from London) was set up on the basis of the three main London airports: Heathrow, Gatwick and Stansted. Smaller airports in England and Wales were disregarded. The three London airports were connected to the then four main airports in Scotland: Edinburgh, Glasgow, Prestwick and Aberdeen thus giving London full strategic control of future airport development in Scotland, consolidating the role of Scottish aviation to that of a feeder service for the main London airports. The main carrier at the time was British Airways at Heathrow and British Caledonian (always more British than Caledonian) at Gatwick. As a municipally owned airport, Manchester was free to develop independently – and did!
There was no lack of demand, indeed the Glasgow/Edinburgh shuttle routes were the busiest internal routes in Europe and British Airways benefited substantially by charging huge fares to use these routes as “feeder services” for their European and Worldwide destinations. Later when (Air Passenger Duty (APD) was introduced, the UK government began to get their ‘cut of the action’ as Scots paid twice, in a ‘double whammy’ to reach destinations that could have been served directly from Scotland if we did not suffer from the London-centric policies of the UK.
In recent years, there has been a blossoming of additional European connections from the low cost airlines. These are very welcome but somewhat erratic in distribution. Some serve major destinations like Berlin; others say to Poland cater for migrants; and some are seasonal, closing down in the late summer or early autumn. Most are designed for the tourist market, both outward and inward. Business benefits but tertiary airports distant from the centres of trade dilute the benefits. Nevertheless, such flights are all to the good in giving choice. As yet, the completion between Edinburgh and Glasgow has to be assessed. And as indicated, it main short-fall is on intercontinental routes.
Government air policy, as distinct from the free market competition from the low cost airlines, within the UK to date has, in effect, turned Scotland into a captive market for both the airports and the airlines as Scots are forced to pay much more than should be necessary to reach a host of European and Worldwide destinations because of the quite intentional Westminster-directed policy of underdevelopment of direct routes in favour of feeder services via London.
The question that must be asked is – if the main carriers, the UK Government and the airport owners are all enjoying considerable extra income because of this arrangement why should we ever believe they would want to change things through introducing more direct flights?
Scots have been slow to realise that while most people in England are within a reasonable distance of either London or Manchester (which both enjoy a huge range of flight destinations), those in Scotland have had to pay feeder flight costs and double taxes in order to reach their destination.
As the debate rages over even more airport capacity in London, the risks to Scotland are obvious. The overcrowding makes landing slots even more valuable so we are already seeing Scottish routes being curtailed as landing slots are sold. Any sensible government would recognise that this overcrowding must be reduced, not increased, and that a very sensible and economically beneficial way to do this would be to introduce a much wider range of direct flights throughout the rest of the UK, thus vastly reducing the number of people who require to travel to London. It is madness that while Scotland calls for more direct routes, the main aviation debate in the UK centres around the development of yet another runway at Heathrow or another major new airport for London.
Far from accommodating this, the policy should be to develop air travel throughout the rest of the UK, thus reducing the gross overcrowding of the skies in southern England.
Effect on Tourism
Again this summer, many of the tourists visiting Scotland from abroad, who arrived by air, largely into airports in England (due to the lack of connectivity to Scotland) spent only a fraction of their holiday time in Scotland. Many of the package tourists transferred to English coaches on arrival in England; they travel north, usually stopping off for a few days in the Lake District on their way here. This explains why fewer than 50% of foreign holiday visitors to Scotland travel further than the Glasgow/Edinburgh line as they need to return south to catch their return flights and so do not have time to visit the Highlands of Scotland-which should be the jewel in the crown of Scottish tourism. Others were discouraged by the onward costs and inconvenience of travel. This leakage costs Scottish tourism hundreds of millions of pounds every year in terms of revenue and also a great many jobs. Our economy could be given a giant boost if the range of direct flights in and out of Scotland were increased to the same level as countries of comparable size like Ireland, Norway or Finland.
Overseas tourism is hugely significant to Scotland’s economy accounting for a massive 35% of total tourist spend (Visit Scotland) and the markets of the USA, Germany, France, Ireland and Australia represent 45% of those overseas visitors (Visit Scotland). The vast majority of US visitors land at English airports and stay there since the direct services to Scotland are extremely limited and expensive. Direct services from Australia and New Zealand are non-existent. This is not a recipe for success or expansion.
It is a salutary lesson for Scotland that while we have less than 50 direct long haul flights from Scotland per week, Ireland – a country smaller than Scotland – has direct long haul flights to more than double that number. The same is true of Finland and Denmark. All offer many more destinations than are available from Scotland.
Scotland also lacks direct routes to the rapidly growing East and South East Asia tourist markets and is falling behind other European countries of a similar population. From Oslo, for instance, there are regular flights to Bangkok and Seoul; Copenhagen offers flights to Bangkok, Beijing, Shanghai, Singapore and Tokyo. These are markets that should offer rich rewards for Scotland with our world famous golf courses, unrivalled scenery and historical attractions. Yet, currently, tourists from these countries face a hugely expensive, tiring and time consuming obstacle course to get here.
So, what are the options open to an independent Scottish Government?
- Within the UK there seems little prospect that the current policies affecting air travel are going to be reversed. This means all we can look forward to is more enormous spending on further airport development around London, increasing pressure in the short-term (to free up short haul landing slots at the busy London airports) in favour of more lucrative long haul slots to an increasing range of international destinations) coupled with lower frequency of internal air routes to and from Scotland. There is thus a strategic objective to reduce dependence on London and Amsterdam by encouraging direct international flights.
- With full control of air transport policy moving from London to Scotland, a host of new opportunities becomes possible. With the economics of the aviation industry impacted by jet fuel costs, it is unlikely that a Scottish Government would rush into establishing of a national carrier given industry economics and consolidation. Instead the achievement of independence by itself will give rise to a higher international profile and increased demand. Subject to EU/EFTA rules this may be achieved through either a free market approach enhanced by temporary inducements or by a joint venture where the State takes a stake in any such development. It is essential that when a Scottish Government negotiates entry to EU/EFTA, it seeks concessions in the interests of enhancing Scotland’s communications with other EU members to enhance European trade and exports in the light of Scotland’s current aviation international isolation which constitute a special circumstance that the EU might accept short term until the imbalance is repaired.
- A Scottish Government may determine to substantially increase a route development fund to encourage private operators to introduce a range of new direct routes to and from Scotland.
We have a good and improving tourist product in Scotland with over 94% of visitors to Scotland stating they were satisfied with their Scottish holiday (VisitScotland) and no fewer than 84% saying they will definitely or probably revisit Scotland within the next five years (Scottish Visitor Survey). Would it not be a nice thing to make it a bit easier for them to get here next time?
The Business Impact
While the effect of this lack of direct routes on tourism is significant, the impact on economic development and business travel is even more serious. When any inward investor or business looks for a new location, one of the first considerations is ease of travel: ‘Can our customers; Can our sales force; Can our management easily connect with our markets from that location?’ While Scotland is at the top of the table in terms of the quality of life, skilled labour, higher education and locations offered to incoming business, it must be near the bottom in terms of direct air links.
Nowadays air cargo is also an important consideration in these assessments and Scotland is particularly weak in this area due to the lack of European and Worldwide destinations available from Scottish airports. Recent figures showed that while Scotland exported around £500 million pounds worth of whisky last year, England exported over £2.4 billion of whisky as most of it left from ports and airports located in England. Recent reports also state that one of the largest exports to leave Heathrow Airport in the last year was a consignment of Scottish salmon. With better air links, much of this business could be sent through Scottish airports, leading to an increase in jobs and wealth here in Scotland as well as reducing road congestion, haulage costs and carbon emissions..
While the Scottish Government and Scottish Enterprise have every right to be pleased with the excellent inward investment results in recent years, this progress could be greatly accelerated if we could develop the same air travel frequency and available destinations of a Finland or a Denmark.
As quality of life arguments become increasingly important in business decision-making, Scotland – with its high education levels, skilled workforce and high quality of life – becomes a very attractive location for any new business development, particularly now that the internet has removed many of the previous disadvantages of remote locations. We are already seeing a repopulation across the Highlands and a booming Inverness. This process is set to continue in the years ahead. There, and generally, we do need to ensure that air travel connections improve to a level in line with our economic ambitions. With the powers open to an independent Scottish Government, this is something that can be achieved in a relatively short period of time. It is clear that the sort of development necessary is never going to happen while we remain within the UK which is dominated in thinking and outlook by the needs of London. It would be a high priority if Scotland were independent.
Air Passenger Duty (APD)
One of the greatest disincentives to aviation in Scotland is Air Passenger Duty (APD). This was introduced in 1994 with a rate of £5 for UK and EU flights and a rate of £10 elsewhere. Since then, it has seen several increases including a doubling for passengers travelling other than in economy class (Reduced Rate = economy class; Standard Rate = premium economy/business/First class).
|Bands (approx distancein miles from the UK)||Reduced rate (lowest class of travel)||Standard rate (other than lowestclass of travel)|
|From 01/04/13||From 01/04/14||From 01/04/13||From 01/04/14|
|Band A (0-2000 miles)||£13||£13||£26||£26|
|Band B (2001-4000 miles)||£67||£69||£134||£138|
|Band C (4001-6000 miles)||£83||£85||£166||£170|
Table 1: APD rates according to band and class. Four geographical bands were introduced in 2009 based on the distance from London to the capital city of the country concerned (with the exception of the Russian Federation which is split east and west of the Urals).
HM Treasury consulted on APD reform in March 2011 with ideas including a possible move from four to two bands, inclusion of premium economy type seats in the reduced rate, the introduction of a lower regional rate or congestion charge for capacity constrained airports, as well as the possibility of devolving APD in Scotland, Northern Ireland and Wales.
The UK Government decided not to make any changes to the structure of the APD regime and announced that it would introduce legislation to devolve aspects of APD to the Northern Ireland Assembly. Further, they would continue to explore the feasibility and likely effects of devolution to Scotland and Wales. They refrained from announcing a congestion charge for capacity constrained airports and said they would continue to examine the role of the tax system to support rebalancing the UK economy across the regions.
APD rates saw a further increase on 1 April 2013 and will again in 2014.
APD was extended to business jets on 1 April 2013. This includes all flights on aircraft with an authorised take-off weight of 5.7 tonnes or more. The highest rate of APD applies to flights on aircraft of over 20 tonnes but with fewer than 19 seats
From 1 January 2013 the rates for direct long-haul flights from Northern Ireland (NI) were devolved to the Northern Ireland Executive which immediately reduced them to zero. Direct long haul journeys from NI are those where the first part of the journey is to a destination outside Band A..
A ‘Poll Tax of the Skies’ Penalising Scotland
Air Passenger Duty is generally now seen as a punitive tax which is hurting the struggling aviation industry and strangling economic growth at a time when it is most needed. And if we are all supposedly Better Together, why should Northern Ireland be singled out for preferential treatment? If it was to compete with Dublin and Shannon, why was Scotland left high and dry with no ability to compete fairly with Ireland and other parts of Europe?
Since it was introduced, this ‘poll tax of the skies’ has increased by a factor of nearly 19 for some flights.
At his 2013 budget the Chancellor, George Osborne, failed to address widespread concern about the damaging effects of APD. In fact, he pressed ahead with inflation increases. The new rates are shown in table 1, above.
A poorly-timed tax on a fragile industry
As the UK economy slowly begins to recover from the recession, the aviation industry is struggling. The aviation industry contributes hugely to the economy of the UK and taxing it at punitive levels is causing untold damage to our prospects for recovery.
The British Government’s approach is in stark contrast with other EU countries where they have realised the damaging nature of penal aviation taxation. The Dutch – a big competitor country for the UK – have abolished their airport taxes, and the Irish have dramatically reduced theirs.
The UK may question why so many Scots now fly via Amsterdam rather than London to connect with their flight to destinations not available from Scotland. The answer is staring them in the face. It’s called APD.
An environmental tax?
In its recent response to the public consultation on APD – in which BALPA (the British Airline Pilots’ Association) took part – the Government has acknowledged, for the first time, that APD is a revenue-raising cash cow for the Treasury, and not in any way an environmental tax.
This is certainly the case. In fact, APD has the perverse effect of increasing carbon emissions. People are drawn to taking connecting flights via European airports, such as Amsterdam, to avoid APD rather than flying direct. This results in more pollution.
The Alternative Option
Many industry bodies believe that the overall level of aviation taxation must reduce, especially with the implementation of the EU Emissions Trading Scheme (EU ETS) which will put further price pressure on airlines which will pass cost increases to passengers.
Nobody is complacent about the environmental impact of aviation. However, aviation’s contribution to global carbon emissions should be put into context. If we were to ground every UK flight, global man-made CO2 emissions would be cut by 0.1%. All UK domestic and international flights account for around 6% of UK CO2 emissions, compared to 31.1% from power stations and 21.6% from road transport.
Of course the aviation industry could do more to cut carbon emissions; but APD will not encourage that. The UK Government should be using policy levers to help the industry invest in research and development. New technology is the only major way the industry can cut its contribution to carbon emissions. Artificially constraining demand, which has huge knock-on effects on the economy, will not.
A recent study by PwC has concluded that scrapping APD would more than pay for itself by boosting economic prosperity and creating 60,000 jobs.
A more optimistic outlook on the benefits of scrapping APD was released by the World Travel and Tourism Council.
Their research shows that removing Air Passenger Duty would result in an increase of up to £4.2 billion in GDP and the creation of up to 91,000 jobs.
The results are based on 2012 APD bands and the estimated effect of removing APD on 2012 fares.
The channels of impact are:
- Aviation and tourism GVA (Gross Value Added): Abolishing APD would increase passenger numbers and therefore add GVA to the aviation industry itself, including activity in airlines, airport operators and retail units within airports. This would lead to further “multiplier” impacts through the supply chain and the consumer spending of additional wage income. UK tourism would also be boosted by higher foreign visitor numbers, raising direct UK tourism GVA, and leading to further (tourism-related) multiplier effects. However, UK tourism would also lose out as cheaper air fares would encourage some people to take holidays abroad instead of in the UK. This could have some negative impacts.
- Aviation and tourism employment: Higher GVA in the aviation and tourism industries would increase employment as more workers are required to deliver the higher level of economic activity. Employment would also go up as a result of higher GVA from multiplier effects.
- Additional consumer spending effects: The APD reduction will increase income available to passengers. Inbound and outbound passengers will likely spend some part of this extra income on goods and services in the UK economy, thus leading to further GVA and employment benefits.
Aviation and tourism industry impacts vary according to assumptions regarding how sensitive passengers are to changes in fares. This research uses two sets of UK estimates: one by the Department for Transport (DfT) and another prepared by Intervistas. DfT estimates show a lower sensitivity than estimates by Intervistas. Therefore, the results show a range of outcomes:
- Abolishing APD would raise UK GVA by between £1.8 billion and £2.9 billion in 2012 accounting for the boost to the aviation and tourism sectors from increased passenger numbers (including multiplier effects).
- The GVA impact above would mean an extra 38,000 to 61,000 jobs in the UK economy.
- The additional income for consumers from lower fares provides a stimulus to consumer spending and could further raise GVA by over £1.3 billion and employment by 30,000 jobs.
- Abolishing APD would lead to an increase in direct GVA for the aviation sector of between £407m and £722m depending on the elasticity assumption. The associated direct employment impact is between 7,900 and 14,100 jobs.
- Including multiplier effects arising from the aviation sector, the impact on UK GVA goes up to an estimated £956m to £1.7 billion, equivalent to 19,000 to 33,600 jobs.
- Tourism impacts from increased international visitors add another £1 billion to £1.73 billion in GVA (accounting for direct, and multiplier tourism impacts), with an extra 22,200 to 38,300 jobs.
- However, as the price of an airline ticket decreases, some domestic tourists will choose to substitute their domestic trip to go abroad.
- Not only will some UK residents substitute a domestic trip to go abroad, some passengers travelling abroad by other modes of transport (rail, ferry) will also switch to air transport as the relative cost decreases.
- Tourism impacts from a fall in UK residents choosing the UK as their holiday destination will lead to a fall in the total tourism GVA of £150m to £480m, equivalent to 3,300 to 10,600 jobs, giving a total tourism impact of an estimated £852m to £1.25 billion and 18,900 to 27,700 jobs.
- Together, aviation and tourism sector benefits for the UK economy on abolition of APD are estimated to be between £1.81 billion and £2.9 billion in GVA, and an additional 37,900 to 61,300 jobs.
As Scotland is at the end of air transport line, so to speak, and paying more tax, there will be a higher benefit
A Scottish Government, recognising the benefits to both tourism and economic development, should eliminate APD entirely. Studies of the removal of APD in the Netherlands and Northern Ireland – led to resulting increases in both tourism and business travel. In the case of Northern Ireland there was an immediate rise of 14% in the number of business trips to North America.
The Impact of APD on direct flights from Scotland
The lack of direct flights from Scotland to far-away destinations (whether that be required for business or pleasure reasons, or both) has been noted with dismay. The accepted system in the United Kingdom of encouraging feeder services into London Heathrow has made it the biggest international airport in the world in terms of international passenger traffic. This strategy is unnecessary and detrimental to:
a) The environment
b) Quick flight times
c) Tourism Foreign business investing in Scotland
d) The pockets of hard-working people wanting to go abroad
There are also notable differences in the short-haul destinations from Scotland compared to other small nations.
During the course of this research, several other, relatively small, Northern European countries were studied: Finland, Sweden, Norway, Denmark and the Republic of Ireland. Only 1 of these countries – Republic of Ireland – has an APD-equivalent; however this is a flat fare of 3€ per flight compared to the UK’s myriad of rates depending on distance and seating class.
Generally, the main airports in these comparator countries were found to have more intercontinental routes and also a higher frequency on such routes. Several routes could have operated from Scotland to our betterment.
|Airport||Long-haul destinations||Departures per week||Long-haul APD|
Table 2: Comparison of long-haul destinations from Scottish airports and those of other small countries
There are also notable differences in the availability of short-haul flights. The data in table X show how the three largest airports in Scotland (in terms of passenger numbers) compare to several other main airports in small, independent European countries.
Table 3: A comparison of the number of European flights and their frequency from several European airports
Each of these airports, including the relatively small Shannon, offers several direct flights which suggests possible replication in Scotland. Shannon is exceptional since it serves the Irish American market
Shannon – which only handles about 1.4 million passengers per year, much less than Glasgow (7.1 million) and Edinburgh (9.2 million) – offers direct flights to Boston, Chicago and New York-JFK; none of which is available from Scotland.
Flights to East and South-east Asia are found from Oslo (Bangkok and Seoul), Copenhagen (Bangkok, Beijing, Shanghai, Singapore and Tokyo). South-east Asia is an ideal market for Scotland to tap into given Asia’s economic expansion. This arguably would lead to a boost in inward investment in Scotland as well as the high-spending tourists such flights would bring in their wake. It could also boost exports for Scotland, generate jobs (as has been referred to later in the paper) as well as offer holidays for Scots direct from Scotland.
In terms of short-haul flights, there are no flights to European destinations such as Vienna, Helsinki and Zurich.
The prospect of new short or long haul routes being started Scotland is hampered by APD. This is already obvious when considering the frequency of long-haul flights from Glasgow and Edinburgh when compared with, for example, Copenhagen.
An analysis of the impact of the 2010 APD increases in Scotland was carried out in 2011. It talked about the reduction in services from Edinburgh – Newark in the past couple of years (from twice daily to once daily) and the impact of the increase in APD on both services from Glasgow and Edinburgh to Newark. Over £2 million worth of tourism was lost in the year 2010-2011 from the Scotland-Newark services alone, due to the APD rises.
Newark, Dubai and Heathrow were all studied. The proportion of passengers connecting onto other flights from each of these major hubs is large. This emphasises the need for more direct flights from Scotland. An assortment of data is listed in tables 4-6 below. On the flights studied from Glasgow (Heathrow, Newark and Dubai) and Edinburgh (Heathrow and Newark), a majority of passengers connected onto another flight. Only 21% of passengers on the Glasgow-Dubai flights terminated their flight in Dubai. About 71% of those flying to Dubai connected onto a flight in band C or D, most likely to China, south-east Asia or Australia/New Zealand. Almost a fifth of travellers from Glasgow/Edinburgh to Heathrow and a seventh of those flying from Aberdeen to Heathrow were connecting onto band A destinations – predominantly continental European destinations.
Table 4: Glasgow data
Table 5:Edinburgh Data
Table 6: Aberdeen data
*Calculated using 2009 BA figures
#Insufficient data – low figure of 1-2% for each band C and D assumed.
This necessity to go via Heathrow, or any other UK airport for that matter, could lead to those departing from Scotland being double-taxed as they may have to pay for APD on their domestic sectors, as well as long-haul. There are complex rules for domestic passengers connecting onto long-haul flights in terms of the APD due. This could lead, very easily, to administrative errors and the unlikelihood of passengers seeking to reclaim over-paid tax.
The relevant UK government body claims “regional breakdowns of APD income are not collected”; however, since Scots, per capita, pay more tax than our counterparts in the rest of the UK. Wales has always suffered from poor air links, whether that be on domestic or international routes. Northern Ireland has had an air link to New York for many years and, after pressure from Continental Airlines, the NI Executive was forced to seek devolution of APD and then abolish it for long-haul, economy-class flights. (i.e. no APD on direct long-haul flights from Northern Ireland).
The high percentage of travellers from Scotland connecting onto another band A destination from Heathrow is an indicator of a lack of flights to some European destinations (as was mentioned above), which are essential due to Scotland’s position on the periphery of Europe.
Feeders: UK vs Scandinavia
Interesting comparisons can be made with Scandinavia. The Nordic region has a similar geographical set-up to the UK – 3 small countries (populations of ~5 million) and 1 larger country (Sweden, population of ca. 10 million people).
Just as in the United Kingdom, there are two airlines offering travel from Scandinavia. These are Norwegian Air Shuttle and SAS. Neither of these airlines operates a major feeder service. They both offer services from each of the 4 Scandinavian countries.
In the UK, British Airways and Virgin Atlantic generally only offer scheduled long-haul services from London airports. As they offer many flights per day as a feeder service from Scotland’s cities catering to domestic business travel, they have a role which will continue as Scotland’s population would not be large enough to provide unlimited continental travel. Nevertheless and not unnaturally, they take economic advantage from the centralising policies of the British Government permitting them to concentrate their activities in the London airports and Manchester. The fact that this unnecessary centralisation costs Scottish consumers is irrelevant to them as the British Government is not interested in the impact on Scotland.
Although APD is only added to passengers’ tickets, cargo can also be affected. Many airlines carry profitable cargo on passenger services, such as Emirates – who offer a twice-daily service from Glasgow to the Middle East.
The UK’s main regional airline, Flybe, has a codeshare arrangement with Air France which allows UK-based customers to fly to Paris and then connect onto Air France’s long-haul network
As well as the region-based airlines, Scandinavian countries also receive many flights from foreign carriers, such as Thai Airlines and Qatar Airways. An Asian airline would certainly be beneficial for both business and leisure travellers.
In addition to the many social and economic benefits available to Scotland if air passenger duty were to be abolished and the availability of more direct flights to distant and some European destinations, there is also an environmental advantage. The need for Scots to fly via airports south of the border, or further afield (e.g. Amsterdam, Paris, Frankfurt or Dublin) generally leads to a higher carbon emission than that of a direct flight from Scotland – even on flights with a southerly destination, e.g. Glasgow to Kenya. The table below lists several journeys with the associated carbon dioxide emissions. This information purely strengthens the need for abolition of APD and direct flights.
|Route (return)||CO2 emissions/ tonnes (per flight)||Total CO2 emissions/ tonnes (total journey)||Class of flight|
|Glasgow-HeathrowHeathrow-Hong Kong—————————Glasgow-Hong Kong||0.242.02—————————2.00||2.26—————————2.00||Economy|
|Glasgow-HeathrowHeathrow-Hong Kong—————————Glasgow-Hong Kong||0.245.85—————————5.81||6.09—————————5.81||Business|
Table 7: CO2 emissions for certain flight routes (none of which are available directly from Scotland)
[Data calculated from www.carbonneutralcalculator.com/flightcalculator.aspx – accessed July 2013]
Transport Scotland notes that aviation accounts for about 12% of Scottish transport emissions (and is showing the largest emissions growth); however it recognises the inclusion of aviation in the European Union’s emissions trading scheme (ETS) which essentially caps aviation emissions. This gives an incentive to invest in both new technology and more efficient fuels.
Transport Scotland has also acknowledged the “importance of [aviation] to our…economic prosperity” as well as the “benefits that affordable air travel brings”.
The large boom in aviation of the 1990s was primarily caused by low-cost airlines. It is in these airlines’ best interests to operate the most fuel-efficient aircraft. This is seen, for example, from Ryanair which operates a young, efficient fleet of aircraft – all fitted with wing-tips which increase fuel efficiency at cruise altitude. Air passenger duty and indirect flights discourage environmental, economic and social improvements. The tax is set at a flat rate within each band so there is no consideration of the age or efficiency of an individual airline’s aircraft is taken into account. The airlines which invest in a young, efficient fleet do so for economic rather than environmental reasons. The tax discourages a number of direct flights from more regional airports as well as severely impacting the long-haul aviation market in Scotland. It is also unfair for passengers to be both charged for APD and ETS – a point picked up by airline bosses and ABTA (a large UK travel association). ABTA has been quoted as saying:
“[ABTA accepts] that aviation should pay its proper environmental cost but believes that cost is more than reflected in the current APD levels. This is particularly true with the introduction of the [ETS]”
The Scottish Government has been hailed as showing ‘global leadership’ due to its inclusion of both domestic and international aviation in the Climate Change (Scotland) Bill 2009; even though the Scottish Parliament has few policy levers to deal with aviation.
Emissions Trading Scheme (ETS)
Not enough attention has been devoted to ETS. The European Union’s emissions trading scheme (ETS) was started in 2005 and was expanded to include aviation in 2012. The ETS is a European-wide scheme to limit emissions across many industries, including aviation. The long-term ambition is to create a global carbon market.
The main benefit of this scheme lies in its consideration of actual emissions. This means that airlines which operate modern, fuel-efficient aircraft do not have to ‘buy’ a higher emissions allowance unlike airlines operating older, fuel-heavy aircraft. It is an incentive for airlines to operate efficient planes and is an improvement on the UK’s APD for environmental safeguarding..
Compared to 2012 aviation emission levels, a 21% reduction is to be achieved by 2020. This system actively encourages a reduction in emissions, but also encourages growth in the sector, especially in countries with poorer air links. This has also, of course, been taken quite negatively by airlines; however, in today’s ever more green-thinking world, such a scheme is necessary. Unlike APD, at least makes allowances to encourage growth in the aviation market – but also encourages sustainable services. The “one size fits all” approach of APD is very discouraging to airlines and hampers developments.
Northern Ireland and the Netherlands are two ideal countries to study. In 2011, the UK government set APD for direct, long-haul flights from NI to the then short-haul rate of £12. When reduced to zero and between 2011 and 2012, more business trips from North America to Ireland were made (increase: 14%)
The Netherlands introduced an equivalent to APD in 2008 and it was scrapped in the subsequent year. Passenger numbers at Amsterdam dropped by almost a tenth between 2008 and 2009, and this was with a maximum rate of 48€ compared to the UK’s maximum of £188 (£376 in exceptional cases).
Denmark briefly had a ticket tax, and the Belgian Government considered introducing such a scheme but it was never imposed due to the predicted impact on the industry.
An up-to-date comparison is provided in table 8. This compares Scotland’s two largest airports with those in similar countries across Europe. It is based on information received directly from the airports and compares all long-haul flights scheduled to depart between 00.00 and 23.59 local time on Monday, 2nd September 2013.
|Airport||Country||APD?||No. Long-haul departures||Average distance/ km||Rate payable if flight departed UK||No. long-haul arrivals|
Table 8: Scheduled long-haul flights on Monday, 2nd September 2013 – a comparison.
*Flat rate regardless of distance
Although Glasgow appears to be in line with some other small countries’ international airports (such as Oslo), a further look at the destinations in question shows Glasgow has only daily services to three destinations (Dubai, Newark and Philadelphia). The rest are summer-seasonal destinations such as Orlando and Cancun. It is presumed that these routes generally only encourage outward tourism and so benefit Scotland’s people socially and not at all economically. Frequent, scheduled services from relatively wealthy countries would encourage inward tourism and assist Scotland’s tourist sector, jobs market and GDP. Flights to strong economies (such as China) are needed to boost foreign investment in Scotland, to increase the 15-year high reported this year. We need to develop this to build a strong, stable economy for the future. Scotland leads in many things, such as its talented people and the world-class universities; but we lack an effective air route network. Combining these elements with a strong, intercontinental route network would help Scotland improve its performance.
Currently, Scotland is inadequately served by an effective network of domestic and international air services. This leads to increased costs and inconvenience to both business and leisure travellers, and impacts adversely on the tourist industry. In the latter case, high spending travellers fly into London and Manchester for their UK experience with many being siphoned off to the sights in London and southern England. To get to Scotland the individual traveller has to entrain or fly with all the inconvenience of managing luggage and waste of holiday time on internal travel. Package holidaymakers will pay only a fleeting visit when direct services might enable them to stay in our country longer and taste its infinite variety.
For business travellers, there is the time spent on two flights when one would serve better. Nor can it be forgotten that poor air connections provide a barrier to incoming industry and might be an explanation why the south of England economy has grown disproportionately in recent decades compared to that of Scotland and other economic regions of the United Kingdom. It is difficult to provide a detailed calculation of GNP lost but common sense indicates that in this global economic and financial world inability to provide adequate air communications to major centres of world activity has served Scotland ill.
As indicated in this paper, the reasons for this imbalance has been because the UK Government, its regulatory agencies, the main UK airlines and the London-based airports have connived to make London the air transport centre of the UK through centralising international flights through the UK capital. The role of Scottish airports has been to harbour feeder services as an inadequate substitute for a national network serving the needs of our country. The imposition of Air Passenger Duty (the equivalent of a Poll Tax of the Air) has rubbed salt into the sores.
There is little point in this paper to wail about the treatment of Scotland by the UK Government. That is the nature the UK political ‘beast’. It has to prioritise the needs of London and the south where an influential and large part of the UK population (and the votes) is concentrated. This paper is written on the supposition that Scotland will have independence and will be free to make its own judgements and policies. It recognises that the removal of APD could be done by transfer of powers from the UK Government which, so far, is unwilling to do so.
As in our previous papers, Options for Scotland provides ideas and policy options. These are not policies. It will be for the political parties to look afresh at Scotland’s needs after independence, whether they supported and of these options or not and frame their policies and manifestos for the first and successive General Elections by which the Scottish people, and no one else, will choose the political party they wish to form a Government.
AVIATION POLICY OPTIONS
- The Scottish Government should have a strategic objective of reducing dependence on the London/Amsterdam hubs for intercontinental travel to major world centres while maintaining a balance with network access.
- Given that the creation of an independent country will give Scotland a higher governmental, international and diplomatic profile and with it additional demand, a Scottish Government should seek to liaise with the airlines to provide the services rather than follow the outdated concept of establishing a national carrier. It should also in its negotiations with the EU/EFTA seek short term agreements to fertilise air connections with European centres until such time as Scotland’s isolation and unbalanced dependency is overcome.
- A Scottish Government should consider increasing resources for a route development fund to encourage air operators to introduce a range of direct routes to and from Scotland.
- A Scottish Government should eliminate the Air Passenger Duty immediately to reduce costs to business and leisure travellers and thus expand air traffic from and to Scottish airports. There is no place in Scotland for this economically damaging ‘Poll Tax of the Skies’. This could done with the consent of Westminster as now or with independence.
Iain Lawson Entrepreneur and businessman in Scotland, Estonia, Lithuania and Cyprus, Honorary Consul of the Republic of Estonia, former SNP Candidate.
Researcher: Scott Aitken