The good news for the UK is that business aviation movements are picking up – they are up 2% for the year, gaining 130 flights per month, and turboprop flying is up 7% year-on-year.* However, this recovery is still relatively fragile and as such it is ever important that regulators setting policy in the UK fully appreciate the impact of their decisions.
Unfortunately, there is still an ongoing perception (by regulators and government agencies) that our community is all about providing luxury travel for a privileged few. We have seen little recognition that our offering is corporate stimulation for inward investment to the UK and one that supports growing our exports of goods and services from the UK.
We applaud the USA’s No Plane No Gain campaign, launched and funded by the National Business Aviation Association (NBAA), which focused on the corporate jet as a valued business tool. No other mode of transport can enable a time-poor executive to visit three or four European cities in one day and be home in time for dinner. The fact is that 97% of our clients are flying for business. We are not about selling luxury; rather we are providing agile, time efficient services to optimize time in a business environment. The onboard facilities of the jets provided in most cases are no different to the majority of business class scheduled flights. Compared with the First Class offerings provided by Middle Eastern operators our facilities could be viewed as quite ordinary.
There are countless reports highlighting the direct and indirect investment associated with our industry. However, what is not shared is the induced value, which more than doubles the direct and indirect values. Even the PricewaterhouseCoopers (PwC) paper produced in 2007 shows a European GVA (Gross Value Added) of €18.7bn (US$20.4bn). These activities help stimulate growth and create jobs and at a national level this is vital to the UK GDP as an enabler.
It is vital for us to lobby hard at every opportunity to push forward the value and benefits offered by business aviation – to local MPs, MEPs, government agencies and the NGOs established to support our sector. Our sector is business aviation and we are about just that, business. Our industry supports business development, which encourages growth for the UK. This not only increases GDP and employment it also helps to retain our position as a key hub in the European market. We want to see future government policies being carefully considered in order to understand the potential impact that short-term decisions could have.
Air passenger duty
We have seen recent examples of poor decision making by government departments. The latest air passenger duty (APD) changes due to be implemented to our sector in April this year (coined the luxury or Learjet tax) is a decision based not on the impact it might have on GDP, nor the impact it may have on corporate activity, but on what will be perceived in a political context.
The reduction in APD on scheduled airlines is, of course, a positive decision to encourage travel for the travelling public and the additional removal of APD for 12-year-olds from May and then 16-year-olds from next year is a further boost for family holidays. Yet the significant increase in charges for business aviation is seen as acceptable because we carry high net worth individuals and charging APD is a way to target the ultra-wealthy. Using business aviation as a political tool to counter favor with the public at large is not an acceptable approach. So we need to be bold like our American colleagues and fight for business aviation to be recognized for the prosperity it brings into the community. We also need to recognize that the vast majority of people using our services do so to be more effective in generating new opportunities and generating employment.
As well as the anomaly with APD we find ourselves on the receiving end of a cost recovery program associated with the management of UK borders. Border Force once provided point of entry services without charge but is now looking to charge for providing these services for business aviation users – unless they use a main passenger terminal. Mainstay terminals do not meet the service expectations of our clients in terms of service delivery. But what is really concerning about this change in approach is the way in which we have been consulted, or not been consulted, as to how such a change could be implemented.
Currently we are faced with an approach that is just focused on five airports (London Luton, London Stansted, London City, London Biggin Hill and TAG Farnborough) that will leave some users paying nothing per arrival, where others could pay £300 (US$447) per arrival. This is wrong on two levels – firstly because it creates an unnecessary market distortion, and secondly because if you keep adding charges to those entering the UK for the benefit of bringing in business we will reach a tipping point. The Italian government found that out to its cost with an ill-informed business aviation taxation policy that they had to rescind very quickly. Unfortunately, the market quickly changed its decision making process and avoided Italy. That market never recovered and is still down some 17% years later.
This is why we are pressing for government departments and their agencies to make joined up decisions. An economic impact assessment should have been made on these two issues together in light of the current market. We will shortly see the publication of a report we commissioned by DfT as a consequence of the GA Red Tape Challenge. If initial thoughts are to be believed it could show a reduction in the size of the GA market from its value seven years ago.
In a market that is struggling to recover, would you really choose to increase taxation or instigate charges on that sector that is still so fragile?
March 24, 2015
*Figures from WINGX Advance Business Aviation Monitor