Possible reduction of APD on UK domestic flights to save Flybe - impact on BA
Jan 14, 2020, 6:08 am
#31
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But aren't APD and taxes PAYED by the traveller, but collected by the airline to make things easier? There are many places in the world where you pay tax at booths at the airport.
Isn't it FRAUD when someone collects a tax/duty and doesn't channel it further? Or better said,,, they've been using the money they've collected as APD for something else; which I think is infuriating and not transparent.
If they can't run profitably, they should just close the shop. Someone else will cover their place.
Isn't it FRAUD when someone collects a tax/duty and doesn't channel it further? Or better said,,, they've been using the money they've collected as APD for something else; which I think is infuriating and not transparent.
If they can't run profitably, they should just close the shop. Someone else will cover their place.
I thought that APD was charged on the carriage of passengers on an aircraft, per passenger. As such it is due to be paid from the airline. Some like BA pass it on to the customer as tax/fee and is invoices as such. If then it was part of an all included fare the money would belong to the airline.
https://researchbriefings.files.parl...13/SN00413.pdf
Indeed the following document suggests the refund of APD when a customer does not fly is a commercial decision of the operator.
Jan 14, 2020, 6:08 am
#32
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Taking over routes from failing/failed businesses is probably not the wisest of moves for other carriers. Yes, some of the routes may be profitable, but there is a reason that Flybe is where it is. I think many routes, whilst vital in the sense that no one else does them and they provide interregional connectivity that simply isn't there otherwise, are simply not profitable. Whether another carrier can make them profitable or not is a different question, but it would be a risk to them.
As a going concern, I suspect subsidy is the only answer if the value these routes offer outstrips the fact they are commercially unviable.
Exeter to London, for example, is nice if you're connecting, but if not the train would be preferable in the vast majority of instances. The train takes double the time, but removes the airport faff and also gets you into central London for onward travel.
Newquay to London is a different argument.
I hope a solution can be found, but I think the only way of doing so is if the government bails it out. If it does that raises an interesting question of what it means for Virgin - the government after all doesn't want to be effectively subsidising an apparently healthy business.
As a going concern, I suspect subsidy is the only answer if the value these routes offer outstrips the fact they are commercially unviable.
Exeter to London, for example, is nice if you're connecting, but if not the train would be preferable in the vast majority of instances. The train takes double the time, but removes the airport faff and also gets you into central London for onward travel.
Newquay to London is a different argument.
I hope a solution can be found, but I think the only way of doing so is if the government bails it out. If it does that raises an interesting question of what it means for Virgin - the government after all doesn't want to be effectively subsidising an apparently healthy business.
Jan 14, 2020, 6:19 am
#33
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The benefit to Flybe of APD reduction is much more immediate, in that they have millions in APD tax liabilities outstanding which is killing their cash flow and probably breaching a covenant of the Virgin Connect deal that prevents the release/investment of further funds.
The option of reducing/removing APD is to minimise that liability so that Flybe can keep the lights on, not to see them return to profitability in the long term.
The option of reducing/removing APD is to minimise that liability so that Flybe can keep the lights on, not to see them return to profitability in the long term.
We passengers are paying a tax (ADP) to FlyBE. The full understanding is that FlyBE is forwarding that money to the government. If the government waives the claim for ADP, then either FlyBE or the government need to refund the waived ADP to all passengers.
Jan 14, 2020, 6:36 am
#35
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UK retail prices are not set "plus duty/tax" they are set "including duty/tax/profit/costs of supply/staff/etc".
Jan 14, 2020, 6:40 am
#36
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I wouldn't sling words like "fraud" about if I were you, unless you have some concrete evidence (which you don't, in this case). It makes you sound like some sort of clueless American, frankly.
In the UK, taxes and duties are included in the sale price and not itemised. That's the law. The price you're paying is set as a price from the retailer including taxes and duties payable to HMRC and the retailer's other costs and profit. The retailer can vary the price as they wish, while they still have to pay the taxes and duties to the central government (usually, to HMRC). The Treasury may reduce tax or duty rates to give the retailer a greater margin of the price, but there is no "fraud" if the retailer does not vary the price downwards. You might think the retailer is overcharging in that case, but that's your opinion and you're free not to buy if you don't want to. Meanwhile, the Government is hoping that the retailer might reduce prices, but they are still not obliged to do so. In a highly competitive market, a competitive retailer might reduce their prices (after a tax or duty decrease) while preserving their profit margin.
Occasionally, the Government tries to regulate prices more closely but that is not the case with air fares.
What I was arguing is that if I've had flown with Flybe during 2019, whenever you bought a domestic ticket the fare is stratified in the following:
TOTALŁ32.81
One way price for all travellers (includes taxes, fees and surcharges)
1 AdultŁ6.00
Taxes And FeesŁ26.81
TAXES AND FEESŁ26.81
Air Passenger Duty - UNITED KINGDOM (GBAD) Ł12.00Passenger Service Charge (Embarkation) - UNITED KINGDOM (UBAS)Ł13.81
TOTAL PER ADULTŁ26.81
X 1 ADULT
Ł26.81
So they specifically collected the APD money from EACH passenger.
Now they say they can't pay it. That means they have used that APD collected money for something else. It could be that it's completely legitimately to do so (I'm not a tax expert, barrister or accountant), but it's not TRANSPARENT, and from my very personal PoV, in the fraud grey area.
Jan 14, 2020, 6:43 am
#37
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APD was introduced in I think 2007 , there would have been the usual environmental camouflage , but in reality it was the treasury method of getting a "cut" out of the LCC s boom. Unfortunately as we see here " one size does not fit all" - Fly Be provide great connections to places U2/ BA / FR could never make viable , I hope the UK government abolishes APD and that Fly Be survives - However I will mis my nights in Dublin when I am positioning for a cheap non APD flight that I would otherwise have routed through LON .
Jan 14, 2020, 6:49 am
#38
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So they specifically collected the APD money from EACH passenger.
Now they say they can't pay it. That means they have used that APD collected money for something else. It could be that it's completely legitimately to do so (I'm not a tax expert, barrister or accountant), but it's not TRANSPARENT, and from my very personal PoV, in the fraud grey area.
Now they say they can't pay it. That means they have used that APD collected money for something else. It could be that it's completely legitimately to do so (I'm not a tax expert, barrister or accountant), but it's not TRANSPARENT, and from my very personal PoV, in the fraud grey area.
It's not fraud. Please stop saying "fraud" when there is no fraud.
Jan 14, 2020, 6:50 am
#39
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APD can be paid either monthly or yearly - if Flybe is set up for yearly payment, which I suspect it will be, there is nothing untoward going on there.
If they were on monthly returns they would have missed several payments to HMRC and I suspect that would have made the news months ago.
Using the money to pay for other things, which has clearly been the case, puts you in a poor position but is preferable to immediate bankruptcy, even if it only kicks the cash flow problem a few months down the road.
If they were on monthly returns they would have missed several payments to HMRC and I suspect that would have made the news months ago.
Using the money to pay for other things, which has clearly been the case, puts you in a poor position but is preferable to immediate bankruptcy, even if it only kicks the cash flow problem a few months down the road.
Jan 14, 2020, 6:52 am
#40
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APD was introduced in I think 2007 , there would have been the usual environmental camouflage , but in reality it was the treasury method of getting a "cut" out of the LCC s boom. Unfortunately as we see here " one size does not fit all" - Fly Be provide great connections to places U2/ BA / FR could never make viable , I hope the UK government abolishes APD and that Fly Be survives - However I will mis my nights in Dublin when I am positioning for a cheap non APD flight that I would otherwise have routed through LON .
Any abolition would be for purely UK domestic flights only. So say an EDI-LHR-CPT would still attract the current Ł170odd rate
Jan 14, 2020, 6:53 am
#41
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In any case, my understanding is that APD will still be due but the government are exploring mechanisms that defer the liability for three years, meaning that the duty will still need to be collected but Flybe (and others?) do not have to settle with HMRC within the same tax year. Basically they are kicking the tax can down the road in the hopes that it gives Flybe/Connect Consortium more options / breathing room to put a rescue plan in place.
Jan 14, 2020, 6:58 am
#42
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Used to use them years ago on the GLA-BHX-CDG route and their punctuality left a lot to be desired. From what I've read it's not improved much over the years. Good luck to them though, it would be a shame to see them disappear.
Jan 14, 2020, 7:01 am
#43
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Good briefing here which shows why the government is worried:
https://www.routesonline.com/news/29...nects-the-uk-/
Flybe provide more than half the capacity at Southampton, Newquay, Exeter and Belfast George Best. And also significant amounts at Jersey, Isle of Man and Wick. They also supply more than half of domestic capacity at Manchester, and a higher proportion of non-London domestic.
While some of this will undoubtably be picked up by EasyJet, Ryanair, Loganair etc. you have to wonder whether a lot of these routes will just go and whole airports close. Politically that would be difficult.
https://www.routesonline.com/news/29...nects-the-uk-/
Flybe provide more than half the capacity at Southampton, Newquay, Exeter and Belfast George Best. And also significant amounts at Jersey, Isle of Man and Wick. They also supply more than half of domestic capacity at Manchester, and a higher proportion of non-London domestic.
While some of this will undoubtably be picked up by EasyJet, Ryanair, Loganair etc. you have to wonder whether a lot of these routes will just go and whole airports close. Politically that would be difficult.
Jan 14, 2020, 7:01 am
#44
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When you buy a sandwich from Pret in the airport, for example, Pret collects VAT to pay to the government. That VAT is due to the government, but only at a later (quarterly) time. It is not uncommon for a business to have much higher profit margin at some times than others, and therefore their cashflow can be such that they collect VAT, use the operating cash near that time for other purposes, then later have higher profits so that by the time the VAT payment is due to HMRC, they have sufficient extra cash to pay HMRC. It's not ideal from a financial stability point of view, but some businesses do operate like this and you don't even notice unless they go bust.
It's not fraud. Please stop saying "fraud" when there is no fraud.
It's not fraud. Please stop saying "fraud" when there is no fraud.
Now they say they can't pay it, otherwise they close the shop. That means they have collected the money for APD, but spent it on something else.
Fraud
nou
- [uncountable, countable] the crime of cheating somebody in order to get money or goods illegally
Essentially, on my last FlyBe flight from LHR to EDI the FlyBe cheated on me by saying they collected APD, which as a passenger I have to pay, for later them not paying it to HMRC.
Jan 14, 2020, 7:07 am
#45
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Fraud requires an element of deception to achieve a financial gain. Far as I can see, Flybe has not been deceptive and is currently achieving no financial gain - they simply cannot pay the money due because they don't have it.
This is not fraud.
This is not fraud.