Back to Regional e-Newsletter NEU Q4 2009
Guest columnist - Rob Siddall
Rob Siddall, CEO
UK Airport Operators Association
The recession has had a significant impact on the UK's airports. Average annual growth in traffic has dropped from 4-5% to -10% this year, a 15% reduction, making it a very tough year for many airports.
This situation is exacerbated by on-going increases in Passenger Air Duty (APD).
There is some good news, which is that the freefall in traffic numbers appears to have stopped and we are bumping along the bottom. Assuming the right regulatory and taxation structure, and the improvement in the world's economy, we fully expect a return to the long-term growth we have seen in aviation over the past 60 years. What we can't predict is when the recovery will start, but start it will.
The recovery of our sector is vital to the UK economy as a whole. Earlier this month, we published research on aviation's contribution to UK plc. One of the key findings was that the sector (i.e. the activities of airports, airlines and aircraft service providers in the UK) directly generated £8.8 billion of economic output in 2007. Adding the economic activity in aviation's supply chain, which provides economic inputs to the sector, increased this to a total 'economic footprint' of £18.4 billion, or 1.5% of the UK economy. It is important to remember that aviation is also an enabler of other businesses, supplying a vital tool for overseas trade: the face-to-face meeting.
As John Cridland, CBI Deputy Director General, said, "As the UK moves into recovery, aviation is critical to boosting the wider economy by increasing connectivity, and driving trade and investment." He might well have included the rest of the EU, because very similar factors apply in other countries.
There are two key threats that could jeopardise both aviation's short and long term recovery. The first is increased taxation, particularly in the form of APD. And the second is potential failure to deal with aviation's environmental impact through a global Emissions Trading Scheme (ETS).
The tax burden faced by the UK aviation sector is currently higher than that faced by other European countries - and in a global industry, the unilateral imposition of taxes, APD for example, can damage businesses disproportionally. Our study showed that aviation's tax contribution (as a percentage of contribution to the economy) is 54.5%. This is significantly higher than the total UK economy equivalent of 32.1%. Increasing this further will only increase our tax burden, stifling growth.
The aviation industry fully recognises its role in reducing carbon emissions. However, we must ensure the industry isn't penalised simply because its global nature makes it complex to regulate. The Copenhagen Climate Conference next month must agree on a global ETS scheme for aviation, instead of burdening airlines with varying regional schemes, each requiring different reporting and evaluation data.
At the Airport Operators Association, we are confident we will see a return to growth. When that growth starts, and how strong it is, will depend to a large extent on confidence that we are, and will be, working under fair and sustainable regulatory and taxation structures.
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