Memorandum submitted by Flybe
1. ABOUT FLYBE
Flybe welcomes the opportunity to respond to
the Treasury Select Committee inquiry into Climate Change and
the Stern Review.
Flybe is one the leading low cost airlines in
the UK and Europe's largest regional airline following the proposed
acquisition of BA Connect. 80% 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.
Following the proposed acquisition, Flybe will
operate 159 routes from 22 UK and 35 European airports with passenger
numbers doubling to around 10 million each year.
Based in Exeter, Flybe began life in 1979 as
Jersey European Airways, later British European. Relaunched as
a low cost brand in July 2002, Flybe has become one of the UK's
most innovative and dynamic regional low-cost carriers.
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.
With many of our core services based on inter-regional
activity, Flybe has led the way in delivering greater consumer
choice and economic growth in the regions we serve. And as the
UK's most important non-London-based carrier, Flybe is dedicated
to bringing low fares to the regions, making a valuable contribution
to the spread of economic prosperity on a truly nationwide basis.
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.
Flybe is committed to reducing the environmental
impact of air travel. We have expressed our strong support for
the principle of emissions trading and shortly plan to launch
an eco-labelling scheme to improve passenger's knowledge of the
carbon emissions of different airlines. Flybe has recently accelerated
its current fleet renewal programme with a £1.2 billion investment
in Bombardier Q400 and Embraer 195 aircraft that will be complete
by 2009. At that time Flybe will have a fleet of 77 aircraft,
which will be one of the youngest and most environmentally sensitive
fleets in the world. In line with its environment policy Flybe
will by then have reduced fuel consumption by over 50% per seat.
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 social backgrounds.
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 perpetuated by opponents
of the industry, that air travel is enjoyed by an elite minority
who do not pay their own way, when in fact the reality is very
different. The low cost revolution has made air travel accessible
to all socio-economic groups and has allowed many people to fly
regularly for the first time.
Air travel does make a contribution to global
carbon emissions but it is important to set this in context, particularly
in comparison to power generation, road transport, and the agricultural
sector.
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 background 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 also be a priority
for Governments to target when seeking to control emissions.
3. SUMMARY
— We do not believe that Air Passenger
Duty 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 Department for Ttransport'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.
We do not believe that APD provides the best
mechanism to cover the external costs of air travel and 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 the most 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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