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Special report: Tax cut could see Liverpool Airport take off

Last week Irish carrier Ryanair announced four new routes out of Liverpool John Lennon Airport (LJLA), taking the total up to 31.

This represents an investment of £80m into the airport and will lead to the creation of an extra 30 jobs. Ryanair also said it would raise the capacity on seven existing routes out of Liverpool by 15% for the forthcoming summer season.

On the following day the airport itself announced it was to hold a recruitment day to fill 200 vacancies. Both of these announcements would indicate LJLA is making a strong comeback after enduring the most torrid period in its history during the pandemic.

However, Ryanair also used the opportunity to return to an issue that has been a bugbear for UK airports, and the airlines that use them, since 1994 – Air Passenger Duty (APD).

APD is a levy on every airline ticket sold for passengers departing from airports in the UK and the Isle of Man. Rates vary according to the class of travel and the distance of the flight.

From April there will be four APD bands, one for domestic and three – A,B and C – for overseas flights, which is then further broken down by class of travel.

Lowest rate for band A, for flights of 2,000 miles or less, is £13, rising to £26 for all other classes. For a band C flight (2,001 miles to 5,500 miles) in the most expensive seat the levy would be £200 per passenger.

There is a higher rate for travel in an aircraft of 20 tonnes or more equipped to carry fewer than 19 passengers. In band C this is £601 per passenger.

In 2022, in order to stimulate demand for air travel within the UK, the Government announced that APD on domestic flights will be halved from £13 to £6.50 in April 2023.

It is estimated this will cost the Government £58m in lost tax revenue each year. Overall it is estimated APD will raise £3.5bn in the 2022/23 fiscal year.

However, other countries in Europe either do not have an equivalent tax or have much lower rates. This, says the aviation sector puts UK airports at a competitive disadvantage. It argues the economic boost from scrapping APD would far outweigh the loss to the Treasury.

In late 2020, Ryanair axed most of its UK internal routes. This was largely in response to demand plummeting during the pandemic. But the airline has long argued such routes have long been vulnerable due to APD.

The only one that operated last summer was the one connecting Derry in Northern Ireland, to Manchester.

However, following the Government’s announcement of the halving of APD for domestic flights Ryanair announced a number of new routes. These included London Stansted to Cornwall and Belfast to Edinburgh.

Paul Cherpeau, Chief Executive of Liverpool Chamber, believes there is a middle way that can help the city region achieve economic growth while still making a contribution to our decarbonisation efforts.

He told LBN:

“Ryanair’s decision to expand capacity and service at Liverpool JLA is great news for the city region and is reflective of the high-quality performance it delivers to passengers and carriers every day.

“The wider arguments for and against the abolition of Air Passenger Duty are complex and there is economic and ecological rationale on both sides.

“On the face of it, any initiative which puts more money in the pockets of consumers and encourages businesses to grow should be welcomed. Indeed, we have already seen that the reduction in domestic duty has incentivised operators to increase routes.

“Conversely, we must also remember why the duty was introduced and that we face a climate emergency. We cannot escape our responsibilities to create sustainable investment in the longer term.

“It’s important therefore that while APD remains in operation it must be ringfenced and used directly to support the air travel industry to innovate and modernise, separate from general expenditure.

“This in turn can stimulate even further sustainable expansion of our airport infrastructure and the creation of new jobs and wealth in the city region economy.”