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Possible reduction of APD on UK domestic flights to save Flybe - impact on BA

Possible reduction of APD on UK domestic flights to save Flybe - impact on BA

Old Jan 14, 20, 1:49 am
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Possible reduction of APD on UK domestic flights to save Flybe - impact on BA

Following news from various outlets;

The government is considering possibly reducing APD on ALL UK domestic flights to save Flybe, to not fall foul of state aid laws this would apply to ALL airlines.

This got me thinking what the impact would be on BA and my existing bookings. Much of my flying is UK domestic.
Presumably this would if implemented reduce the cost of future fares, but would it;
1. Give me a refund on any flights booked before but traveling after implemented?
2. Effect the viability of INV as a destination in the longer term?
3. Give BA more scope to comeback to the regions - (LGW-ABZ is my long term wish)?
4. How could this effect the APD charged when booking starts with domestic sector?
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Last edited by Akoz; Jan 14, 20 at 2:12 am
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Old Jan 14, 20, 2:32 am
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No special knowledge, but here are my initial thoughts:

1. I think so, following the example of when they removed APD for children.

2. Probably not. INV was subsidised to recognise the fact that it's that much more remote than other destinations and so train travel, etc. wasn't viable, hence good air links are essential to the economic viability of the region. While there were some savings on APD, fares were (and are) different from INV and represented the bulk of savings for anything other above premium economy. I suspect the main distorting effect would be to attract passengers who would otherwise depart from elsewhere in Scotland; no reason why BA couldn't keep differential fares from INV if they wanted to attract the "ex-EU" price-sensitive market for premium cabins.

3. Yes, but probably not as much as a bunch of slots becoming free due to FlyBe disappearing...

4. Will depend on the wording but if the aim is to benefit FlyBe and maintain competition in the industry, feeder flights should be excluded.
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Old Jan 14, 20, 3:11 am
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Do you think airlines would actually reduce fares?

Of course not. Reducing APD in itself wouldn't improve Flybeís financial position unless they kept prices the same - they need that cash for their bottom line.

did it happen when it was removed for direct long haul departures from Northern Ireland? Donít think so and Continental still pulled out. Iíve not priced a VS to MCO from Belfast and compared it to ex GLA to LGW but Iím betting any variation is a couple of quid not the full current rate of APD

Removal from UK flights would only be for domestics. Flying from say NCL to LHR to JFK would still attract the standard rate just as it does now.

Last edited by UKtravelbear; Jan 14, 20 at 3:16 am
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Old Jan 14, 20, 3:26 am
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Originally Posted by UKtravelbear View Post
Do you think airlines would actually reduce fares?

Of course not. Reducing APD in itself wouldn't improve Flybeís financial position unless they kept prices the same - they need that cash for their bottom line.

did it happen when it was removed for direct long haul departures from Northern Ireland? Donít think so and Continental still pulled out.

Removal from UK flights would only be for domestics. Flying from say NCL to LHR to JFK would still attract the standard rate just as it does now.
I agree, Flybe need that money for their bottom line. But outside of Flybe, on LON-Domestic such as LGW-EDI/GLA where a direct cost is removed/reduced would U2 and as a result BA drop fares accordingly?

Taking BA's case - Fees (inc. APD) are itemised on the bill and so could and should be reduced, mainly thinking of existing bookings. (They may then going forward, to some locations increase fares to compensate and take this money, leaving the net result the same).
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Old Jan 14, 20, 3:35 am
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Originally Posted by Cymro View Post
2. Probably not. INV was subsidised to recognise the fact that it's that much more remote than other destinations and so train travel, etc. wasn't viable, hence good air links are essential to the economic viability of the region. While there were some savings on APD, fares were (and are) different from INV and represented the bulk of savings for anything other above premium economy. I suspect the main distorting effect would be to attract passengers who would otherwise depart from elsewhere in Scotland; no reason why BA couldn't keep differential fares from INV if they wanted to attract the "ex-EU" price-sensitive market for premium cabins.

4. Will depend on the wording but if the aim is to benefit FlyBe and maintain competition in the industry, feeder flights should be excluded.
Would this approach not cause the government to charge APD on all travel with the final destination outside the UK including from INV? It would be hard to justify INV keeping a full exemption given that the main reason is connectivity in that region. No APD on all domestic would meet connectivity requirement.

I doubt BA worry about providing price sensitive ex-EU people at INV. What is the difference to BA if those people start in DUB, AMS etc. rather then INV? In most cases BA would fly them to the ex-EU location it the same way they would fly them to INV.
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Old Jan 14, 20, 3:44 am
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1. It may well do, but if the argument is that the Scottish Highlands and Islands are particularly remote and they want to subsidise economic development then they may want to maintain the exemption for long haul flights. It's harder to justify though.

2. I'm more than a little surprised but I can't understand how else base fares from INV would regularly be lower than from GLA, ABZ, etc. (OK maybe ABZ has oil companies funding a lot of flights but that can't be the whole story, can it?) I'm sure the selection of INV is influenced by the lower APD, too, but again - that can't be the whole story.
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Old Jan 14, 20, 3:49 am
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So APD is supposedly an environmental tax to encourage land-based forms of public transport and actively discriminate against airlines. But then when an airline gets into trouble because of it, we remove it again. Great thinking!

Seeing as APD is a tax, and as such goes directly to the government, how is this going to help FlyBE? That can only be done by retroactively removing APD which FlyBE cannot pay, but that in turn would mean that we must all get our APD refunded.
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Old Jan 14, 20, 3:50 am
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The question of whether fares reduce is an interesting one. For the overwhelming majority of flights there is competition for BA, and whilst this is true for some domestic routes LGW-EDI/GLA and we may well see reductions here if one of the airlines reduces. On the other hand, the competition on other routes is against not flying, such as LHR-MAN vs the Avanti West Coast. The price point to attract business is unlikely to change on these routes so I expect the fare to remain the same.

for historical bookings, I think legally they will need to refund the difference.

Obvious caveat, this is all speculation.

Originally Posted by Tafflyer View Post
So APD is supposedly an environmental tax to encourage land-based forms of public transport and actively discriminate against airlines. But then when an airline gets into trouble because of it, we remove it again. Great thinking!

Seeing as APD is a tax, and as such goes directly to the government, how is this going to help FlyBE? That can only be done by retroactively removing APD which FlyBE cannot pay, but that in turn would mean that we must all get our APD refunded.
presumable it will help if it reduces prices for FlyBe so that they can either increase fares to maintain the price paid or reduce price to encourage bookings providing cash flow.
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Old Jan 14, 20, 4:00 am
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Originally Posted by Cymro View Post
2. I'm more than a little surprised but I can't understand how else base fares from INV would regularly be lower than from GLA, ABZ, etc. (OK maybe ABZ has oil companies funding a lot of flights but that can't be the whole story, can it?) I'm sure the selection of INV is influenced by the lower APD, too, but again - that can't be the whole story.
I think some of it is due to the options available - GLA & EDI have many flight to LON. ABZ has quite a few. INV by contrast has somewhat fewer and so choice of flight time is more limited. BA have to be mindful that people traveling from there have similar flight options connecting on KLM out of INV as connecting at LHR and so this may guide price. This is true of ABZ too, but to less of a case due to the better selection of BA flights.

ABZ have long been lobbying that they are loosing out to INV due to APD given the 2 airports are not that far apart. This I believe is also a factor in KLM's use of INV (although can't find the source where I read that!)
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Old Jan 14, 20, 4:08 am
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APD is due when the passenger flies - in particular it is not due when a passenger does not fly, which is why you can get it refunded if you cancel a non-refundable air fare. For convenience, airlines collect it when they collect the fare but they should refund if it is not due (or has decreased) when the passenger flies. Commensurately the airline needs to pay more APD if the rates have increased when the passenger flies compared to when they booked, but many airlines have chosen to absorb the cost when this has happened.

Not asked above but asked elsewhere on the Internet: the EU will not have a problem with this. APD is a national matter and the UK Government can tax, or not tax, air travel as it wishes. Most EU governments have not chosen to tax air travel as heavily as the UK.

Giving FlyBe relief via APD decrease is mainly not intended to make their long term position much more competitive, but to give them short term cash flow.

FlyBe's competition is, apart from other airlines, rail and road. The Independent (Simon Calder) cites improvements in the London to Exeter train route as a significant factor in FlyBe's reduced profit.

On the other hand, routes like Exeter to Manchester (4 hours by train, 1 hour by air) and Exeter to Edinburgh ( 8 hours by train, 1.5 hours by air) are infeasible by train for anyone without a lot of spare time. FlyBe is very important for business travellers based in the South-West, making it a significant economic multiplier with no current alternative. Unfortunately I expect a lot of their revenue is travel to London where the train has taken market share, while their revenue share from travel to other non-capital regions of the UK is much less, yet FlyBe is more important to people from those regions precisely because there are no feasible alternatives.
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Old Jan 14, 20, 4:29 am
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When I was based in Cornwall I weekly commuted to a Manchester on Flybe- it was realistically the only option , but it didnít come particularly cheap when you factored in the addition airport development tax and the singular car parking option with poor public transport links of NQY airport. Flight loads were reasonable though.
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Old Jan 14, 20, 4:31 am
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Originally Posted by navylad View Post
The question of whether fares reduce is an interesting one. For the overwhelming majority of flights there is competition for BA, and whilst this is true for some domestic routes LGW-EDI/GLA and we may well see reductions here if one of the airlines reduces. On the other hand, the competition on other routes is against not flying, such as LHR-MAN vs the Avanti West Coast. The price point to attract business is unlikely to change on these routes so I expect the fare to remain the same.

for historical bookings, I think legally they will need to refund the difference.

Obvious caveat, this is all speculation.



presumable it will help if it reduces prices for FlyBe so that they can either increase fares to maintain the price paid or reduce price to encourage bookings providing cash flow.
But by how much would APD increase flying? Enough to keep Flybe afloat? I donít know, i seems to me a knee-jerk reaction by the government to be seen to be doing something and not have another airline go under on their watch.
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Old Jan 14, 20, 4:35 am
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Originally Posted by 13901 View Post
But by how much would APD increase flying? Enough to keep Flybe afloat? I donít know, i seems to me a knee-jerk reaction by the government to be seen to be doing something and not have another airline go under on their watch.
To me, itís the Gov thinking what legal COA can they undertake to support the airline, without breaching competition rules. Obviously Flybe also asked to delay their tax bill to help with cash flow too, which is another COA, canít really see what else the Gov could realistically do.
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Old Jan 14, 20, 4:36 am
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A view from a Rock

If we're discussing Regional connections, I would hoist the Jersey flag with some observations on today's departures ....

BE - 15 to various destinations (GCI, SOU, LCY, BHX, BRS, EXT).
BA - 5 to Gatwick (LGW).
GR - 3 to GCI

The loss of BE would have huge impact on Jersey, especially the Finance Industry but also, of course, the Tourist Industry and the local population. From a local perspective, BE is simply essential.
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Old Jan 14, 20, 4:37 am
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I'd personally expect that the main effect will be that BA will just get to keep a bit more of their pure domestic tickets by increasing the fare component on those. I expect no change in pricings, no new route openings, and no change to connecting bookings APD.
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