Brief mention in UK Budget on replacement of Air Passenger Duty

The UK Budget Report released on 22 June 2010 (see page 36) made only a brief mention of the replacement of the Air Passenger Duty (APD)(see previous post):

"1.123 The Government will explore changes to the aviation tax system, including switching from a per-passenger to a per-plane duty, which could encourage fuller planes. Major changes will be subject to public consultation."

Perhaps more significant is the line in Budget Table C11 (see page 100) from the new Office of Budget Responsibility which has revenue from APD doubling over the next six years. We can assume that they do not have a doubling of passenger numbers in mind!

Air Vanuatu "rescue"

On 21 June 2010 Radio New Zealand International reported on the "rescue" of Air Vanuatu involving an around US$30m loan to the company.

A 19 June 2010 article and a 25 June 2010 article in the Vanuatu Daily Post provide further background.

There is still a web site seeking proposals for the airline's restructuring.

There can be no doubt that operating a small international airline with a limited network of long, thin routes is very challenging to put it mildly. One might contemplate the governance implications of replacing politicians with civil servants as board directors and where the incentives lie. The company now has only four directors whereas at one point it had 28 directors (see paragraph 68 of this 2005 Pacific Islands Forum paper on Public Enterprises).

LAN using MALIAT rights to code share on Cathay Pacific to Hong Kong

On 17 May 2010 the Chilean airline, LAN started code-share services to Hong Kong (HKG) from Santiago (SCL) using the operations of its oneworld global alliance partner airline, Cathay Pacific (CX) for the sector to HKG. The services are via New York (JFK), Los Angeles (LAX) and Auckland (AKL).

LAN's code sharing beyond the United States and New Zealand to Hong Kong uses Chile's air rights under the MALIAT and separately Chile's air services arrangements with Hong Kong.

South America and East Asia are on opposite side of the globe so the great circle distances involved in the three air routings are not that different, although travel via AKL is shorter:

• SCL-JFK-HKG 21,193km
• SCL-LAX-HKG 20,647km
• SCL-AKL-HKG 18,829km

The calculations were made using Great Circle Mapper.

Canada concludes new air transport arrangements with Cuba, El Salvador, Ethiopia, Morocco and Tunisia

In recent months Canada has announced new air services arrangements with:

• El Salvador (29 April 2010) - "open skies-type ..."
• Ethiopia (1 March 2010) - first agreement
• Tunisia (1 March 2010) - first agreement
• Morocco (9 February 2010) - expanded agreement
• Cuba (7 February 2010) - expanded agreement

Botswana negotiates air services agreement with Ethiopia

The Southern Times reported on 14 July 2010 that, at negotiations held in Addis Ababa on 26-27 May 2010, an MoU was signed concluding a bilateral air services agreement.

The Botswana CAA is reported to be planning to hold negotiations this year with Angola, Egypt, Singapore and South Africa as part of a liberalisation programme.

Singapore and the Philippines expand their air services arrangements

On 13 May 2010 the Singapore Government's Ministry of Transport announced that it had agreed with the Philippines to expand their bilateral air services arrangements by allowing for greater capacity, measured by flights per week (see previous post).

Singapore announces new air services arrangements with Greece

On 17 June 2010 the Singapore Government's Ministry of Transport announced that the previous day it had agreed with Greece to expand their bilateral air services arrangements.

These new arrangements are another example of agreeing to take a more liberal approach to dedicated freighter services than to passenger services.

New Zealand's provincial international airports

Aviation pioneer isn't a phrase one hears very often these days with respect to recent aviation industry developments, but I would describe Ewan Wilson as one in the New Zealand context. In the mid-1990s with Kiwi Travel International Airlines (1995-1996) he established the first regular non-stop international services between Hamilton, Palmerston North, Dunedin and Australia. Serving on a point-to-point basis, in what was about to become in 1996 the Australia-New Zealand Single Aviation Market (SAM), Kiwi used leased aircraft from a number of international aircraft operators in what proved to be an ultimately undercapitalised venture when faced with competition from Air New Zealand's new no-frills subsidiary, Freedom Air (1996-2008).

In those days the global security environment was more benign and it was easier to establish border facilities at an airport for international flights, although the cost of processing passengers on a per-passenger basis compared with at New Zealand's three main international airports was very high.

The following graph illustrates the subsequent rise and fall on international passenger movements through Hamilton (HLZ), Palmerston North (PMR) and Dunedin airports (DUD), and the growing success of Queenstown (ZQN), which now has Air New Zealand, Jetstar, Pacific Blue and Qantas competing. The graph disguises the fact that HLZ temporarily lost its international services until Pacific Blue entered the market, while in the winter of 2009 for some weeks DUD only had one Air New Zealand international service per week. Rotorua (ROT) has only recently secure international services operated by Air New Zealand, while Invercargill (IVC) has for many years sought to attract international operations.

Again the data for the graph comes from Statistics NZ's excellent Infoshare.

The challenge for these provincial airports is that while they offer air passengers the convenience of non-stop point-to-point services, the frequency of international air services available is inevitably much greater at the three main airports and all these provincial airports enjoy good connecting domestic air links. In the case of HLZ there is the added challenge of competing with an improving road link between Hamilton and Auckland Airport.

Today Ewan Wilson is back in the travel industry operating escorted tours under the Grand Journey brand.

Dramatic changes in purpose of visits to New Zealand

The following graph indexes overseas visitor growth to New Zealand by purpose back to the year ended March 2004.

What it clearly shows is that the weakening growth in overall visitor numbers to New Zealand contains within it three interesting trends:

• Strong growth in visiting friends and family (VFR), perhaps connected with related long-term migration
• A lack of growth and a cyclical pattern in holiday visitor numbers
• A collapse in business visitor numbers since 2007

The data source for this graph is the entry cards visitors fill in when passing across the New Zealand border. These are processed by Statistics NZ.

Germany planning to introduce new duty on aviation

On 7 June 2010 Bloomberg reported on the German Government announcement that it would be introducing a tax on air travel to raise one billion euros a year as part of its efforts to reduce its budget deficit. For those that speak German, some further information is available here about what is described as a national ecological air traffic charge on all passengers.

Reaction from the airline industry included:

• Association of European Airlines
• International Air Transport Association

On 17 June 2010 the Brussels-based NGO Transport & Environment posted a story that suggests that it is not yet clear what will happen to this tax when international air transport is covered by the EU Emissions Trading Scheme (ETS).

More background sources on the UK Air Passenger Duty

As we wait to see what the UK Budget on 22 June 2010 will say about the replacement of the current UK Air Passenger Duty (APD) with a Per Flight Duty (previous post), here are some more sources of information about the existing UK APD:

• HM Revenue & Customs releases monthly data that includes information about the total revenue raised for each distance band.
• HM Revenue & Customs published a 10-page regulatory Impact Assessment on the last set of reforms to the APD.
• The UK House of Commons Library has produced a briefing paper on Air passenger duty : recent debates & reform (last updated 14 May 2010).

Fiji negotiators heading for ICAO meeting in Jamaica

On 17 June 2010 the Fiji Times reported that Fiji is sending an air services negotiation delegation to the third ICAO Air Services Negotiation Conference at Montego Bay, Jamaica from 28 June to 2 July 2010. One of the objectives of the Fiji delegation is to continue negotiations with the United Arab Emirates (previous post).

Recovery in New Zealand domestic air passenger numbers

Almost a year ago I posted graphs of domestic passenger numbers through AKL, WLG and CHC airports that clearly showed the impact of the start of domestic (cabotage) services by Pacific Blue and the subsequent impact of the economic recession. I have continued to update this data and the graphs now show growth returning to the New Zealand domestic market.

Recent news from: Air New Zealand on 25 May 2010 that it will be boosting domestic capacity by 3.8% for the Northern Winter 2010 schedule season; Jetstar, which is reported by the NZ Herald on 5 June 2010 to be adding a seventh A320 to its New Zealand-based fleet, and Pacific Blue which is reviewing its New Zealand domestic operation, however, suggests that the supply side of the New Zealand domestic air transport market will be in for some changes.