Memorandum submitted by Flybe
1. ABOUT FLYBE
Flybe welcomes the opportunity to respond to
the Environmental Audit Select Committee inquiry on the Pre-Budget
Report.
Flybe is one the leading low cost airlines in
the UK and Europe's largest regional airline following the proposed
acquisition of BA Connect. We will now have 10 million passengers
per year. Eighty per cent of our flights are domestic and our
low cost services focus on providing point-to-point routes connecting
regions in Britain and the rest of Europe.
Flybe is a low-cost airline committed to providing
new opportunities for people from all walks of life to enjoy the
convenience of accessible air travel. We are driven by the Flybe
differentials which mark us out from many of the other leading
players in the industry by providing our customers with many of
the "frills" of premium carriers including pre-assigned
seating, lounges for our business customers, and additional passenger
legroom in our aircraft.
2. OPENING COMMENTS
Flybe does not underestimate the scale of the
challenge faced by the impact of climate change, and accepts that
aviation must play an important role in the global effort to control
carbon emissions. However we also believe that the contribution
of aviation to climate change should be set in context, in terms
of the emissions from other forms of transport—including
private cars, trains, buses, and the road haulage industry, and
indeed power generation and other industries—and the level
of taxation (combined with minimal subsidies) that airlines and
passengers are already subject to each year.
The aviation industry in Britain, and much of
Europe, is a success story for jobs and investment, and this has
been driven by the growth of highly-efficient low cost airlines
operating in a liberalised market and bringing air travel to people
from all walks of life. Unlike roads and railways which consistently
fail to meet the demands of customers, the airline industry now
provides affordable fares and does not depend on the Government
for operational subsidies or funding for infrastructure. There
is a dangerous myth being perpetuated, that air travel is enjoyed
by an elite minority who do not pay their own way in terms of
environmental effects or fuel taxation, when the reality is very
different. Britain's airlines operate is an extremely competitive
market and the industry pays its own way.
The effect of carbon dioxide emissions from
aircraft is indistinguishable from that of carbon dioxide emitted
by other sources, including alternative forms of transport. As
the Stern Report confirmed, the emissions from aircraft are currently
less than 2% of total carbon dioxide emissions from human activities,
with this share expected to reach up to 3% by 2050.
This provides a useful context for the arguments
for aviation to be labelled as a major contributor to climate
change. Flybe does not believe that this is an excuse for inaction,
but it does clearly demonstrate that many of the claims of environmentalists
are exaggerated, and that other industries should be the priority
for Governments to target when seeking to control emissions.
3. SUMMARY
— Air Passenger Duty revenues now cover
the external costs of air travel, but we do not believe this provides
the best mechanism to promote sustainable growth in the industry.
— Flybe is a strong supporter of emissions
trading, but the proposals from the European Union to introduce
a scheme that only includes intra-EU flights (only 20% of emissions)
is unacceptable and unfairly discriminates against low cost airlines.
— The successful introduction of emissions
trading will ensure that the external costs of air travel are
determined by the market for carbon, and will make APD a redundant
form of taxation.
— The aviation sector has introduced
a number of innovative mechanisms to reduce emissions and combat
climate change, including Flybe's eco-labelling scheme for the
industry due to be launched shortly.
— Aviation fuel tax can only be effective
at a global level due to practical issues that may increase overall
emissions and discriminate against short-haul operators, and as
such efforts should be focused on creating a workable and effective
ETS system.
4. AIR PASSENGER
DUTY
Flybe strongly opposes the 100% increase in
Air Passenger Duty announced by the Chancellor of the Exchequer
in the Pre-Budget Report.
We regard Air Passenger Duty as an anomaly that
serves no purpose other than a revenue raising mechanism for HM
Treasury. Air travel uniquely, unlike any other form of transport
is, subject to APD which amounts to an estimated £1 billion
per year in contributions (projected to rise to £1.8 billion)
to the Treasury.
Flybe accepts that the aviation sector should
be responsible for the external environmental costs of its activities,
provided that this principle is extended to all other alternative
forms of transport.
Flybe welcomes the DFT's plans in the Review
of the Aviation White Paper for an "emissions cost assessment"
to consider whether the aviation sector is meeting its external
climate change costs.
Although APD revenues now cover the external
costs of air travel, we do not believe this provides the best
mechanism to promote sustainable growth in the industry.
Firstly, there is no commitment from the Government
that the revenue from APD will be ringfenced for carbon abatement
measures, offsetting or other environmental purposes.
Secondly, climate change will never be solved
by increasing taxation, even if this revenue is used for environmental
purposes, it will be solved by providing incentives to promote
low carbon air travel to reduce emissions in the first place.
It is far more effective to reduce the emissions of aircraft than
to seek to put an end to low cost air travel, which provides jobs,
innovation and investment in the British economy, or to invest
in carbon abatement projects.
The low cost air travel revolution has transformed
the industry and brought new opportunities for the UK's regions.
We are seeing the low cost model which began in the United States,
and has thrived in Europe, expand to Australia, India, China,
and South East Asia. It has brought jobs and investment, and transformed
an elitist pursuit into an activity accessible for all social
classes.
Now is not the time to restrict growth and impose
new taxation, but to make sure that future growth is sustainable.
This will be achieved with cleaner fuel, green aircraft, more
efficient air traffic control management, and creating a market
for carbon where there are clear incentives for reducing emissions.
Flybe fully supports market-driven innovative
options available to improve the environmental standards in aviation
including emissions trading and eco-labelling.
We are confident that EU Emissions Trading Scheme
will generate significant reductions in the carbon emissions produced
by each flight and will represent a more efficient means to control
the impact of aviation on climate change.
This market-driven mechanism will provide clear
economic incentives for emissions reductions by creating a market
for carbon. This will add significant costs to airlines and passengers,
and the level of APD must be reduced and ultimately eliminated
in order to reflect this additional cost. It is unacceptable to
increase the level of APD on the basis that it will cover the
external cost of aviation, and then introduce emissions trading
with the same objective. Britain's airlines face being forced
to pay twice for the external cost of emissions if APD continues
when ETS is introduced. ETS is a more efficient option to achieve
this objective and it must replace APD, not be added as a further
cost.
5. EMISSIONS
TRADING
Flybe believes the EU Emissions Trading Scheme
offers the most effective solution available for controlling the
carbon footprint produced by aviation sector and avoids the severe
economic effects of tax increases that do not provide incentives
for reducing emissions.
Flybe is a strong supporter of carbon trading,
but the latest proposals from the European Union published in
December 2006 do not go far enough.
The compromise deal means that initially only
intra-EU flights, accounting for 20% of carbon emissions, will
be covered by the scheme.
Flybe believes that to have any impact it must
include long-haul flights in and out of Europe. The watered-down
proposals from the Commission will hit low cost airline passengers
disproportionately and will not affect long haul carriers which
are responsible for 80% of emissions.
We are very concerned that unless all flights
are included from the start, there is a danger that the timescale
could slip as non-EU long haul carriers seek to avoid the scheme
leaving ordinary people who take short affordable flights to pay
for the carbon emissions of international business travellers.
Emissions trading is the best solution to reducing
the impact of air travel on climate change. We are committed to
making it work but there must be a level playing field for all
airlines if the scheme is to be successful.
6. ECO-LABELLING
We believe that much greater informed consumer
choice is an effective force to drive environmental standards
in the aviation industry.
This is why Flybe will shortly be announcing
a new Eco-labelling scheme for aircraft—a concept of establishing
a system using a labelling scheme where aircraft are graded based
on fuel burn, carbon emissions, noise footprints and total environmental
cost. In doing so consumers would be informed about each flight
they take. Such an eco-labelling system has transformed the domestic
appliance (so-called white goods) market, and a similar scheme
has recently been introduced for cars by the Department for Transport.
Flybe now wishes to extend this successful scheme
to airlines and we have been developing this concept with independent
technical advisers.
In our view eco-labelling is an effective option
as it provides an incentive for airlines to offer green flying
as consumers will be more aware of the choices available with
a simple graduated system to label to noise and air pollution
of aircraft. It will encourage the aviation industry to reduce
emissions, rather than simply providing resources for carbon abatement
mechanisms. This will also improve the knowledge and understanding
of consumers' individual contribution to global carbon emissions,
and provide a creative market-based solution to the need to include
the external costs of air travel in consumers' decision-making
process.
7. AVIATION FUEL
TAX
The introduction of a tax on aviation fuel at
a national or European Union level will create an unfair market
and the practical implications of such a levy could potentially
lead to increased global emissions.
Flybe does not object to a levy on aviation
fuel in principle, but this is unworkable as the only option is
to introduce this system at a global level which is unrealistic.
If this were introduced at a national level,
then all airlines could simply refuel aircraft at non-UK destinations.
This would require a heavier fuel load, and produce higher emissions
per aircraft.
Similarly if it were introduced at an EU-level
the major global airlines operating in and out of Europe, accounting
for 80% of EU emissions, will refuel in non-EU countries and carry
more fuel.
This will leave the major contributors effectively
exempt from the tax and unfairly penalise low cost short haul
operators. As with an emissions trading scheme that only includes
intra EU flights, this will leave ordinary passengers to pay for
the emissions of international business travellers. The only solution
would be to make this a global system which remains an unrealistic
ambition.
A tax on aviation fuel at a national or EU level
is unworkable, and will unfairly discriminate against low cost
operators and leave the major airlines effectively exempt. It
is disingenuous to compare a tax on aviation fuel with petrol
duty, as drivers to do have the option of refuelling elsewhere.
A more accurate comparison is with the road haulage sector where
operators have an incentive to refuel in the country with the
lowest diesel duty. Similarly unless there is a global system,
the aviation fuel tax will act as an economic incentive for long-haul
carriers to increase fuel loads and produce higher carbon emissions.
The emissions trading scheme is a far more effective
system for airlines to contribute the external costs of flights,
and unlike fuel tax will provide a direct economic incentive to
reduce carbon emissions.
January 2007
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