Budget 2011 and Environmental Taxes

Written evidence submitted by Flybe

Flybe welcomes the opportunity to submit a response to the Environmental Audit Committee’s inquiry into the Budget 2011 and environmental taxes.

We have restricted our comments to the tax system’s ability to create a ‘modal shift’ from high carbon transportation to low carbon alternatives, including Air Passenger Duty , and issues the Government should consider when developing strategies for sustainable aviation.

1.0 Summary

          Flybe supports the view that human activity, including air travel, is contributing to global climate change.

          We welcome the Chancellor’s move to freeze Air Passenger Duty and to consult on the tax banding.

          We do not believe that Air Passenger Duty as currently structured, represents the best mechanism to promote sustainable growth in the aviation industry.

          Flybe believes that aviation taxation should be directly related to emissions, so that those who have invested in cleaner fleets are rewarded and those who have not are incentivised to cut their CO2.

          Reform of taxation to promote sustainable transportation must not be at the expense of the UK’s regions that rely on aviation.

2.0 Introduction to Flybe

2.1 Headquartered in Exeter, Flybe is Europe’s largest regional airline and the UK’s number one domestic airline. Employing nearly 3,000 staff, we currently operate 69 aircraft on 188 routes from 38 UK and 37 European airports in 13 countries and carried more than 7 million passengers in 2010. The airline began life in 1979 as Jersey European Airways, later renamed British European in 2000 and was then re-launched as Flybe in July 2002.

2.2 Flybe has established a regional route network and its spread of airports is intended to offer customers a convenient point-to-point network operating from regional airports which we believe are a preferable alternative to having to travel to more distant major hub airports. In addition, the domestic route network is structured with the aim of minimising the competitive threat from alternative forms of surface transport (alternative road or rail options give journey time of four hours or less.) Not only is the average flight time of a Flybe flight less than one hour, our route network attracts passengers in locations which are more dependent on air transport such as Northern Ireland and other locations where surface transport may be a less attractive option, such as Inverness, Newquay and Aberdeen.

2.3 Since October 2008 Flybe has also operated a franchise arrangement with the Scottish airline Loganair, under which 16 Loganair aircraft fly using the Flybe brand across 28 franchise routes between 18 airports throughout the UK.

3.0 Environmental Policy

3.1. Flybe supports the view that human activity, including air travel, is contributing to global climate change. Although aviation accounts for just 2% of global CO2 emissions Flybe is committed to leading the industry and minimising its environmental impact wherever possible while continuing to provide vital services to our passengers. Such leadership is exemplified not only by one of the youngest fleet of aircraft in the world but also by the implementation of the Flybe Ecolabel in June 2007. The label, modelled on those used in the sale of white goods like fridges, microwaves and washing machines, shows a full range of environmental indicators per aircraft and informs the passenger, in a transparent way, of the environmental impact of their flight.

4.0 Budget 2011 and Air Passenger Duty

4.1 We welcome the Chancellor’s move to freeze Air Passenger Duty and to consult on the tax banding. APD disproportionately penalises the UK domestic passenger given that, unlike those flying abroad, they have to pay the tax on both legs of their journey, so the freeze is very much a step in the right direction.

4.2 We are also pleased that the Treasury has chosen to widen the scope of the tax to include private jets. We have been calling for this level playing field for some time and would encourage the Treasury to go further and include freight flights.

4.3 However, we do not believe that Air Passenger Duty as currently structured represents the best mechanism to promote sustainable growth in the aviation industry.

4.4 Climate Change will not be solved by increasing taxation. Only by providing incentives for businesses to promote low carbon alternatives to existing technologies and business models will we begin to reduce emissions and tackle Climate Change. It is far more efficient 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.

4.5 If the Government is committed to reforming Air Passenger Duty to promote low carbon alternatives, taxation must be in proportion to emissions, so that those that have invested in cleaner fleets are rewarded and those that have not are incentivised to cut their CO2. Only when the polluter pays will the wider aviation industry begin to invest in cleaner fuels, green aircraft, more efficient air traffic control management and other similar initiatives .

5.0 Regional connectivity

5.1 We understand that for some shorter trips road and rail can offer a more convenient and low carbon alternative for many passengers, especially when the journey time is less than two and a half hours. However, it is a London-centric view to suggest that there are always realistic low carbon alternative s to aviation for passengers.

5.2 The rail network remains based around the termi nals in the capital city, where as regional air travel offer s the flexibility a n d convenience of non-London-centric journeys. For example, a trip from Southampton to Newcastle by train takes up to 6 hours, including a tube journey through London. By contrast this would take 80 minutes on a Flybe flight.

5.3 Regional economies rely on fast, reliable air links and any reform of taxation to promote sustainable transportation that limits such services runs the risk of damaging local businesses and communities and undermining the UK’s economic recovery.

5.4 With this in mind we welcome the Chancellor’s focus on the importance of the UK’s regional airports in the APD consultation document, published alongside the Budget, and will strongly be arguing that regional and domestic aviation should be subject to a lower rate of Air Passenger Duty in our response.

26 April 2011