Sunday, March 18, 2007

Tax Airlines Not Passengers - Spot the Difference

Did anyone see Vincent Cable the Lib Dem MP on Andrew Marr’s Sunday morning TV show? Once again he was peddling the liberal mantra of "we want to tax the airlines not the passengers." Roughly this translates as the low cost carriers with high load factors are efficient and the other airlines with lower load factors should take a leaf out of their book and do something about the inefficiencies. Earlier in the year Chris Huhne said, ""A tax on the emissions of each flight, instead of Gordon Brown's duty per passenger, would provide a further incentive to invest in fuel efficient aircraft and to fill up seats rather than fly half empty."

Their naivety is staggering. Do they know how much planes cost? Do they know how long it takes to improve the quality of your fleet, especially when these fuel-efficient aircraft are still being developed? Like many politicians they pontificate in a vacuum. There's not an airline flying that doesn't want to be more efficient, fly with higher load factors etc - because that not only means helping our environmental it also means that they make higher profits.

The vital role that air travel plays in the economy of the UK, and not just because it brings in tourists, is not something that can simply be left to the low cost carriers. In many instances these airlines are operating routes that have little to do with the macroeconomics of Britain. They are opportunistic (nothing wrong with that) in picking destinations that they can fly to with high load factors but then think nothing of changing their route network if a better opportunity comes along.

The tax on aircraft and not passengers that the Lib Dems put forward is little more than subtle electioneering. Do they think that this will not appear on the price of a passenger’s ticket? To say that they want to get passenger load factors up will simply not happen on some routes. The nature of air travel is not like waiting for a bus. There are not cues of people waiting at an airport for a plane and then once it's been filled it will leave. Scheduling aircraft is a complex business and there will always be peaks and troughs in demand that dictate some flights fly fuller than others.

One final point to Vincent Cable who is the Lib Dem Treasury spokesman. The economics of airlines are such that they need to keep aircraft flying in order to make money. Fixed cost versus direct operating costs play a significant part in why airlines fly aircraft/routes that are not always full. It's better to make a contribution to overheads rather than have them sitting parked at an airport.

Once again the parties are using the global warming high ground and it is getting in the way of rational debate.

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