Air Passenger Duty: Regional Airports

Lord Dodds of Duncairn Excerpts

Tuesday 20th October 2015 Westminster Hall

[Julian Knight]

My hon. Friend is a strong champion of regional aviation, and many of her constituents in Redditch not only use Birmingham airport and enjoy its facilities but work there.

As I was saying, York Aviation calculated that some 25,000 jobs rely on the airport, which puts it in a similar bracket to developments such as HS2 in driving the regional economy. Passenger numbers at Birmingham airport have grown by 13% over the past five years and in 2014 alone it handled more than 9.7 million passengers, including a 7.2% growth in long haul. Nevertheless, the airport is running well below capacity. It could conceivably accommodate up to 36 million passengers, rather than just under 10 million.

The potential for Birmingham airport, and I am sure for many other hon. Members’ airports, to impact positively on the UK economy is considerable. Genuinely, we have only scratched the surface of what we can achieve. While we take seemingly forever to debate a new runway at Heathrow, jobs and direct investment in the regions are going begging.

The west midlands is in receipt of over a quarter of all foreign direct investment entering the UK and leads the UK in terms of export growth. It is the only part of our country with a positive visible trade balance with the European Union, seeing overall growth of 100% between 2009 and 2014. Birmingham airport is central to that—but more growth and jobs could be had. A major stumbling block is the air passenger duty regime.

Regional airports are at a disadvantage, as rates of APD are calculated on the destination of the flight and the class of travel that a passenger is in. This fee is the same whether someone flies from Heathrow, Birmingham or any other English or Welsh airport: for flights within the European open skies area, the fee is £13 in standard or £26 in a higher class, but jumps dramatically for flights outside that area, to £71 in standard class or £142 in a higher class. APD in the UK is considerably higher than in our neighbouring competitor economies: in Germany, it is £5.70 in the European open skies area and £32 for the rest of the world in standard class; and in France it is cheaper still, at £3.90 in the European open skies area and £8.90 for the rest of the world in standard.

An Airport Operators Association survey found that the APD has had a direct effect on passenger numbers and routes. Bristol airport reportedly said that several domestic services were scrapped as a result. Routes between Southampton, Leeds-Bradford, Glasgow, Edinburgh and Brussels airports had been “adversely affected” by the tax.

[Mr Nigel Dodds (Belfast North) (DUP)]

I congratulate the hon. Gentleman on securing this important debate. What he is alluding to is all the more pertinent in relation to Belfast City airport and the international airport in Northern Ireland because we share a land border with the Irish Republic, so a few miles down the road Dublin airport does not apply such taxes. We have severe taxes—air passenger duty—in Northern Ireland, so there is a double whammy for us. I support what he is saying and I urge the Government to take seriously the impact of this iniquitous tax on small, regional airports and peripheral areas of the United Kingdom.

[Julian Knight]

The right hon. Gentleman highlights an issue to do not only with his own airport but the wider UK aviation industry. Both Derry airport—also in Northern Ireland—and Cambridge airport in England claim that they are being prevented from expanding their services by APD. My argument is that the hub status of the major London airports, in particular Heathrow, allows them more easily to absorb the shock of air passenger duty, but that is not the case for some of the regional airports.

There have of course been successes in attracting new long-haul routes to Birmingham, for example. We have Air India now flying its routes to Delhi and Amritsar daily; American Airlines has begun daily flights to JFK, alongside the daily flight to Newark—that is not Nottinghamshire; Emirates has launched a third daily flight to Dubai; and this summer Hainan Airlines operated 34 twice-weekly flights between Birmingham and Beijing.

As was made clear to me in my recent meetings with the Ontario Teachers Pension Plan, which owns Birmingham airport and is a responsible trustee, my local airport would love to have a regular direct flight between the UK and China week in, week out, rather than only for the summer, and it is a real failing that in the week in which the Chinese President is visiting we do not have a regular scheduled flight between the UK’s second city and Beijing. We cannot separate the issue of APD and devolution, which is a central plank of the Government’s approach to reforming and reinvigorating the UK economy.

It is hugely important that the fruits of growth that come from devolution extend to our connectivity as well. That must include greater use of our regional airports for short and long-haul flights.