The UK is notorious for their Air Passenger Duty, which is the highest passenger tax levied anywhere in the world. If you’re on a premium cabin ticket originating out of the UK, you’ll pay $200+ for that tax alone. It’s worth keeping in mind that this tax is separate from airport taxes, security taxes, etc.
Well, unfortunately it looks like another European country will be soon be adding a national tax on aviation.
For flights as of June 1, 2016, Norway will begin charging a new nationwide air passenger tax of NOK 80 (~$10) for passengers traveling out of any of their airports. The tax won’t be levied on passengers under two, and on transit and transfer passengers, so only the first flight will be taxable.
Now, in fairness this tax isn’t as horrible as what’s charged out of the UK, but it still has the potential to have a huge impact on passengers and airlines. Keep in mind that there are lots of low cost carriers operating out of Norway (most notably Norwegian Air Shuttle), and they often have extremely low fares. In some instances, this tax alone could be as much as the base fare airlines charge for certain flights.
A4E (Airlines For Europe), the lobbying group for several major European airlines, is of course against this new tax:
“We are astonished about the unwavering approach of the Norwegian authorities on implementing the Air Passenger Tax while almost all comments during the public consultation period contained objections to it. Instead of preventing economic growth and job creation by imposing unreasonable taxes, European governments should create a supportive regulatory environment”, said Thomas Reynaert, Managing Director of A4E.
It’s interesting to hear the economic impact of this change, which could reduce the demand for travel by 5%, equating to 1.2 million fewer passengers per year:
According to IATA analysis, the tax risks reducing the overall demand for air transport by 5%, which equals roughly 1.2 million passengers per year. In addition, the tax would lead to a reduction in the direct and indirect output of the aviation sector by an estimated NOK 1.4 billion (EUR 150 million).
According to analysis by PwC, here’s the huge economic impact of the UK APD:
Economic analysis by PwC shows removing UK Air Passenger Duty (APD) would boost British GDP by 1.7% and create 60,000 new jobs by 2020.
Bottom line
It’s unfortunate to see another country tax air travel across the board. Flying has become so much more accessible than before, and that’s largely thanks to the introduction of low cost carriers, which have greatly brought down fares. Adding taxes, even if it’s “just” $10 per trip, can greatly impact demand.
What I’m curious about is that the tax is apparently being levied for those flying as of June 1, 2016, rather than for those who book their tickets as of June 1, 2016. That means airlines will have to pay the government starting in a couple of weeks — will they try to retroactively collect the tax from passengers, or will they swallow the cost?
(Tip of the hat to Economy Class & Beyond)
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