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Publication - Research Publication

Air departure tax in Scotland: an economic assessment

Published: 8 Dec 2017
ISBN:
9781788514927

An economic assessment on the impact of a 50% reduction in the overall burden of air departure tax and a plan for future monitoring and evaluation.

103 page PDF

2.3MB

103 page PDF

2.3MB

Contents
Air departure tax in Scotland: an economic assessment
Footnotes

103 page PDF

2.3MB

Footnotes

1 The APEX model is a proprietary model that is used for examining the commercial prospects for both new and existing air routes.

2 Price elasticity of demand measures the responsiveness of demand after a change in a product's price.

3 It should be noted that the supply side response used here is conservative in the context of public pronouncements made by the airlines regarding their intended response to these text cute.

4 http://webarchive.nationalarchives.gov.uk/20151202171017/http://www.smith-commission.scot/

5 https://publications.parliament.uk/pa/bills/cbill/2015-2016/0003/16003.pdf

6 http://www.parliament.scot/parliamentarybusiness/Bills/102778.aspx

7 Note – Airports in the Highlands and Islands are currently exempt from Air Passenger Duty on outbound flight legs and it has been assumed that this practice will continue once ADT is introduced.

8 Note that from April 2018, APD rates for Band B will increase to £78, £156 and £468 respectively. Band A rates will remain unchanged.

9 https://www.gov.uk/government/publications/rates-and-allowances-excise-duty-air-passenger-duty/rates-and-allowances-excise-duty-air-passenger-duty

10 For reporting purposes, the 5-year period 2018-2022 period is used in this report.

11 Destination type was determined based on the categorisation provided in the UK Aviation Forecasts 2013. We also accounted for the fact that many travellers break their journey and switch airline en route, e.g. fly with Ryanair to Dublin, then Aer Lingus to Washington D.C. Where travellers used a different airline for the second leg of their journey, and that airline was not a partner of that used for the first leg, it was assumed that the journey was broken and the APD payable was based on the first airport reached.

12 http://www.gov.scot/Resource/0052/00523700.pdf

13 Note that the term ‘Do Nothing’ used throughout the report refers to the scenario where current APD levels are retained in the new ADT, i.e. there is no change in tax.

14 Note that the DfT ‘Low’ and ‘High’ Forecasts comprise a uniform trajectory to 2030. The DfT Central projection includes an intermediate year at 2020 and this explains the different growth trajectories seen here.

15 Note – there is a degree of duplication with year-round operators.

16 Note – Edinburgh and Glasgow are both in the top 100 airports

17 Seasonal flights have been counted as 0.5 of a link.

18 Note – the data in the tables have been developed through a combination of data provided by the airports and searches on Skyscanner.net. The sample summer week is 14 th-21 st July 2017 and the winter week is 17 th-24 th November 2017.

19 Combined Frankfurt and Frankfurt Hahn

20 Combined Milan Bergamo and Milan Malpensa

21 Seasonal from Prestwick

22 Combined Rome Leonardo Da Vinci and Rome Ciampino

23 Combined Brussels and Brussels Charleroi

24 World Tourism Organisation (UNWTO) Tourism Highlights 2014 Edition

25 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/3817/logicmapping.pdf

26 Rent-extraction is the use of the resources of a company, an organisation or an individual to obtain economic gain from others without reciprocating any benefits to society through wealth creation.

27 APEX is a proprietary model available by online subscription that is recognised as an industry standard tool for examining the commercial prospects for both new and existing routes.

28 See for example: http://corporate.easyjet.com/~/media/Files/E/Easyjet/pdf/about-easyjet/easyJet-scottish-apd-consultation-response-final-v2.pdf or http://www.scotsman.com/news/transport/ryanair-announces-new-edinburgh-routes-if-air-tax-is-cut-1-4368437

29 As set out in Table 5.1.

30 See Chapter 3 for details of the Intervistas and Gillen elasticities

31 https://www.scottish-enterprise.com/~/media/.../economic-appraisal-guidance-note.pdf

32 Discounting is the process of determining the present value of a payment or benefit or a stream of payments or benefits that is to be received in the future.

33 ‘Economic Impact of European Airports: A Critical Catalyst to Economic Growth’, Intervistas for ACI Europe, January 2015.

34 Note – Dundee Airport is excluded from the analysis due to the very low passenger numbers and Inverness is excluded as no APD / ADT is payable there.

35 http://www.gov.scot/Resource/0052/00523747.xls

36 http://www.gov.scot/Resource/0052/00522790.xlsx

37 Type I: A supply linkage multiplier (sometimes referred to as an indirect multiplier) due to purchases made as a result of the intervention and further purchases associated with linked firms along the supply chain; Type II: An income multiplier (also referred to as a consumption or induced multiplier) associated with local expenditure as a result of those who derive incomes from the direct and supply linkage impacts of the intervention.

38 http://www.bbc.co.uk/news/uk-scotland-scotland-business-12555618

39 http://www.mynewsdesk.com/uk/norwegian/pressreleases/norwegian-to-create-more-than-130-jobs-in-scotland-ahead-of-plans-for-continued-expansion-at-edinburgh-airport-1718971

40 http://www.dartgroup.co.uk/Media/News/Jet2_com_Announces_Even_More_Destinations_from_Glasgow/

41 http://www.edinburghairport.com/about-us/media-centre/press-releases/jet2-announce-massive-growth-at-edinburgh-airport

42 E.g. Ryanair = Average of 4 rotations per aircraft x 2 (i.e. inbound and outbound) x189 seats x90% load factor x 365 days a year (allows for line maintenance overnight only) = 496,692.

43 Average spend per overseas tourist visiting Scotland was £675 in 2016 using VisitScotland statistics.

44 Proxied based on accommodation and food services sectors.

45 https://abta.com/assets/uploads/publications/Driving_Growth_Report_2015.pdf

46 Welfare Benefits are routinely calculated in transport appraisal and capture non-monetary benefits based on consumer surplus theory.

47 “The Economic Impact of Air Passenger Duty: A Study by PwC”, PwC, February 2013. A more recent version of this report ( http://airlinesuk.org/wp-content/uploads/2015/06/The-economic-impact-of-APD-analytical-update-PwC-May-2015.pdf) supports the general finding but uses a different formulation which is less applicable here.

48 Source for both figures: CAA, https://www.caa.co.uk/Data-and-analysis/UK-aviation-market/Airports/Datasets/UK-Airport-data/Airport-data-2016/

49 http://www.scotsman.com/news/transport/big-emissons-savings-as-air-passengers-switch-to-rail-1-4537238

50 https://www.transport.gov.scot/our-approach/industry-guidance/scottish-transport-analysis-guide-scot-tag/#

51 APEX is a proprietary model available by online subscription that is recognised as an industry standard tool for examining the commercial prospects for both new and existing routes.

52 RDC’s contribution is gratefully acknowledged by the study team

53 Compound Annual Growth Rate

54 Including defining some routes as being seasonal in the way capacity is delivered.


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