AIR PASSENGER DUTY VARIATION

Tender Bid Project for Air Passenger Duty Variation at Cardiff International Airport



Tender Bid Project for Air Passenger Duty Variation at Cardiff International Airport

Introduction

This tender is related to variation in the air passenger duty which aims to understand the potential commercial and economic effects of Air Passenger Duty variation in Wales. Particularly, the study looks at the potential economic effects of a decrease in the air passenger duty at the Cardiff Airport.

Background

In 2010 the Holtham Commission recommended that the Welsh Government should undertake an assessment of the usefulness of some minor taxes, including air passenger duty. Following that recommendation, the aim of the study is to consider whether air passenger duty would provide Welsh Ministers with a useful economic policy lever. APD is levied on the carriage of passengers who are liable to tax on chargeable aircraft from a United Kingdom's airport. It is to be paid by the operator of the plane and is due when the passenger aircraft first takes off. The amount due is dependent on the final destination and class of travel of the chargeable passenger.

Currently, air passenger duty is non-devolved, although the UK Government is on record as continuing “to explore the feasibility and likely effects of devolution to Scotland and Wales". This is likely to be considered by the Commission on Devolution in Wales that is Silk Commission which was launched in October, 2011. This commission was independent that has been formed to reassess the current constitutional and financial deals in Wales. Pending outcome and recommendations of Silk Commission may possibly present that air passenger duty could become an option that the Welsh Government may wish to deploy. A range of the usefulness of air passenger duty as a policy tool to help stimulate passenger numbers at Welsh Airports and attract a more frequent and diverse range of services is required. Cardiff Airport is the only international airport in Wales.

The overall performance of Cardiff International airport remains a serious concern for Welsh Ministers. Passenger numbers at Cardiff have fallen from a peak of 2.10 million in 2007 to 1.42 million in 2010. This decline is in sharp contrast to the growth in passenger numbers enjoyed by Cardiff Airport's main competitor, Bristol Airport, which has witnessed continual increases to over 5 million passengers in 2010. As most air passengers flying direct from Wales use Cardiff Airport, this research should focus on the potential effects to Cardiff Airport and its wider effects on economic activity in Wales. In addition to the possible use of air passenger duty, the Welsh Government is also exploring other potential options with the aim of attracting new services and increasing passenger numbers to increase economic activity. The tender exclusively concerns air passenger duty and its potential affects.

Literature Review

Theory of Market Equilibrium

Variation in the air passenger duty is a phenomenon that should be altered or changed, keeping in view the concept of market equilibrium. The reason of this statement is that if the decision of variation in air passenger duty ...