by Eszter Kantor

A4E is the representative body for European airlines. On behalf of our members, we inform and educate policymakers about the multifaceted nature of the aviation industry. This is no small feat, as a large part of airline operations happens behind closed doors in hangars, maintenance halls, operation centers and cockpits. By the time a passenger boards a plane, hundreds of hours have been spent by thousands of people worldwide to ensure a safe and seamless flight experience. It is our objective to inform policymakers about the far-reaching consequences that a regulation, or the lack thereof, could have on the industry and, ultimately, on the passengers.

Airlines are transportation service providers; they move passengers, luggage and goods from point A to point B; wherever those points may be on the map. As such, they keep the trade flowing across borders, across continents. They make business happen.

Airlines do not operate in a vacuum. They depend on their pilots, crews, engineers, software designers, economists, HR team, aircraft manufacturers, maintenance team and a supply chain made up of millions of people. All participants in the supply chain are taxed according to their income. All airlines pay taxes on their revenues and pay taxes for their employees, as required by the country of their registration. On top of that they pay airport charges as well as security and environmental fees, and they abide by all regulatory measures guiding their operations.

Beyond the multitude of taxes, charges and fees levied on revenue and income, airlines are now faced with aviation taxes. Some member states[1] introduced new taxes specifically for airlines, under the pretense that aviation tax revenues are levied for environmental pollution reduction purposes. Taxes are not going to lower emission or noise levels. Research and development does that.

Environmental taxes (not only for air pollution, but also for water pollution and waste generation) could be levied on manufacturing companies, digital service providers, agricultural enterprises and individuals. In fact, it is always the individual, the final consumer, who pays these taxes. Airlines make on average €4-5 profit[2] per ticket. Absorbing taxes would lead to serious financial difficulty.

Aviation taxes are, as the name suggests, specifically designed for airlines and often put in an environmental context, indicating that they have been levied as a way of punishing airlines for their perceived failure in measuring up to environmental standards. This could not be further from the truth. For decades, airlines have been investing in biofuels and battery-powered jets, the result of which is that currently commercial jets have better fuel efficiency (3.0 – 3.5 liters per passenger kilometer) than most cars on the road. Airlines have signed up to the International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and are committed to continuing to invest in research and development in the field of low/no-emission fleets.

Aviation taxes are a political tool to recoup losses in other government revenue streams, with full knowledge of the fact that these taxes will be passed on to passengers. All passengers. Air travel is no longer reserved for a small fragment of the population. In 2016, a record 169 million EU citizens travelled by air. The tax is levied on them.

Levying tax on airlines holds back growth in the wider national economy as it raises the barrier of entry for new players into the market and slows down the growth potential of the airlines, which means less jobs, less productivity, lower GDP and less government revenue from income taxes. Airline taxes not just harm aviation companies; they also cause long term damage to the wider national economies. A recently commissioned study by PwC[1] shows that countries that have decided to abolish aviation taxes have seen increases in GDP, employment, tourism figures and passenger numbers.

Abolishing all aviation taxes in Europe would mean a real GDP increase of €10.5 billion in 2018, progressively increasing each year and translating into a €25 billion increase in 2030. This means a €215 billion cumulative GDP increase in the EEA over a 12-year period. The value of new goods and services produced in the EEA’s aviation industry would be growing by an additional €3.4 billion each year, which means €10.2 billion by the end of 2020.

All sectors of the economy would be positively impacted by the abolition of the tax. Tourism alone would see a €5.4 billion increase in real GDP. Almost all major sectors of the economy would see a jump in real GDP including transportation, agricultural services and manufacturing.

Abolishing all aviation taxes would also mean that 40,000 new jobs would be created immediately in the year following the implementation, and close to 110,000 new jobs by 2022.

When you levy extra charges on aviation, you shackle trade, development, tourism and employment. These are the very aspects of your economy you would like to see grow. Ultimately, your country’s competitive position in the global market will suffer.

[1] Austria – Air Transport Levy; Croatia – Civil Aviation Authority Tax; France – Civil Aviation Tax, Solidarity Tax, Fiscal Tax (Corsica); Germany – Air Transport Tax; Greece – Airport Development Charge; Italy – Council City Tax; Latvia – Passenger Service Charge; Luxembourg – Passenger Service Charge; Norway – Air Passenger Tax; UK – Air Passenger Duty

[2] International Air Transport Association (IATA) : European carriers are forecast to generate a 2.9% net profit margin and a per passenger profit of $5.65.

http://www.iata.org/pressroom/pr/Pages/2016-12-08-01.aspx