"Scrapping air tax would give Britain's airlines a £16bn boost"

From yesterday's Evening Standard:

Scrapping the “destructive” tax on air tickets would give a desperately needed £16 billion boost to the British economy and help create up to 60,000 jobs, a report claims today.

Ditching air passenger duty, which can be as high as £184 for a business-class flight to Australia, would encourage airlines to expand their route networks, increase tourism to the UK and foster business links with the rest of the world.

The study, from consultants PwC, was commissioned by British Airways, easyJet, Ryanair and Virgin Atlantic, which have all campaigned against the tax since its introduction in 1993.

Ahem.

1. The airlines are always wailing that we need more capacity and more runways, because our major airports are running at full capacity (and it would appear that they are).

2. Therefore, whatever happens to ticket prices and APD, they will not be able to "expand their route networks, increase tourism to the UK".

3. We also happen to know, from general observation and economic theory, that APD is not added to the price paid by the passenger, it comes off the price received by the airline. So lower APD = same total ticket price.

4. If it were the case that airlines ran on very tight margins, then they would have to increase ticket prices by the amount of APD (or else they'd be losing money on each flight).

5. But if they were running on such tight margins, then the "slots" (the simple right to fly from A to B once a day) would not be so valuable. And they are very valuable (depending on where A and B are).

6. So we conclude that while APD is not a very good tax at all, it does not make any difference to anything in most cases (yes there is some idiotic re-routing going on whereby people fly from the UK to Amsterdam or Paris to take their connecting flight). Better would be a flat tax for each take-off or landing and best of all would be to auction of the landing slots every year.