sokolov

The prices of WestJet-Flights from Glasgow to Halifax may drop next year. Scotland is set to reduce and eventually abolish a UK tax known as Air Passenger Duty.

http://www.routesonline.com/news/29/...o-be-devolved/

So far, WestJet has to charge GBP 71 in Economy (CAD 127) and GBP 142 (CAD 254) for Plus-Passengers for flights departing Glasgow as "Air Passenger Duty". I believe there is 5% GST on top of this if you buy a return ticket Canada-Glasgow-Canada.

I hope WestJet will fully pass on those savings to their passengers.

industry_killer

It is a tax Westjet has no choice, but to collect it. If it is abolished then it isn't on the ticket and WS so I don't know what WS has to do with any passing on savings when it is not up to them.

capebretonboy

Do you trust any private corporation?

industry_killer

WS cannot collect a tax that is no longer in place without being on the hook for fraud, so in this case the OP was suggesting that WS would continue charging the APD even after it's repeal by the Scots, so in this case WS would have no choice.

sokolov

Not quite. Most passenger do not care about taxes, fuel surcharges, "ticket" prices and "because-we-can-fees". They care about the bottom line.

Any tax reduction tempts any corporation to increase their net price and only pass on part of the tax reduction, if any. If an airline is happy with their load factor at the old overall price, they may way to keep charging the same overall price - less tax, more "ticket".

industry_killer

The APD is not built into the price of the ticket and is charged like HST at the end of the ticket. As far as I am concerned you suggesting that WS is about to commit fraud and collect the tax unduly for their own profit.

Often1

The entire thread premise is wrong. Scotland is now authorized to reduce or eliminate the APD. But, it must reimburse the UK for the lost revenue from abolishing APD.

It is by no means clear that Scotland will do so just because it is authorized to do so and there is not even a first thought as to where the money might come from.

I wouldn't worry about whether carriers will or won't collect APD or any of the other enumerated taxes or fees. If the APD is reduced or abolished, you won't see it appearing on any carrier's ticket.

sokolov

You don't understand.

There is no allgetion of fraud.

Lets assume the overall price of a specific oneway carriage GLA-YHZ is now $500, of which $127 is ADP. Lets further assume Scotland reduces ADP by 50% to $64. WestJet could simply remove ADP from the calculation and price the carriage at $436.

Or WestJet could raise the "ticket" price and offer carriage at a different price point, like $450, $466, $484, $500 or even $555. More "ticket" less "ADP". Perfectly legal.

Revenue management is the art of extracting the maximum that a given passenger is willing to pay. Most passengers don't care if they pay "ticket" or "YQ" or some odd tax (other than business passengers to the extent thay can earn input tax credits) - passengers care about the bottom line. So, if planes are full at $500 per, why sell for less?

If planes are not full, the airline may be want to reduce the price to sell more tickets. Lowering taxes make it easier for an airline to lower their prices, but they don't make it inevitable.

sokolov

Actually, it has been thought through: Lower ticket prices bring more travellers, which is forecasted to result in a net increase of tax revenue. Said additional travellers tend to spend money on other things, including lodging, food, and ground transportation.

The Netherlands had a similar tax and abolished it, because the tax was bad for overall tax revenue. Travellers and airlines opted to use airports across the border. Similar trends can be seen in Germany and Austria, where a ticket tax was introduced a few years ago. Some airlines even moved their planes and staff to entirely different routes in other parts of Europe.

Scots can't easily move across a border to a less-taxed airport. However, if Scotland reduces its APD, some passengers may use Scottish airports instead of airports in Northern England.

The question is: On which routes is competition strong enough to make airlines actually reduce their overall prices once ADP is reduced? I hope we'll get to see how this plays out.

capebretonboy

Yes, not fraud...just good ol' capitalism. Also, as economists say: prices are sticky downwards. I am pretty sure WS would try to see how much extra fare they could charge in lieu of the tax.