Is the proposed UK ADP increase protectionism?

Okay, so how would we work out to what extent the proposed increase in the Air Passenger Duty (APD) is a “tax grab” and/or protectionism as some have alleged or could have environmental legitimacy (see previous post)?

Could we:
- take the distance and emissions of CO2 for a passenger travelling one-way London-Auckland in economy class from the International Civil Aviation Organization (ICAO) carbon emissions calculator at: http://www2.icao.int/public/cfmapps/carbonoffset/carbon_calculator.cfm which gives an answer of 18,335 Km generating about 1,341.73 Kg of CO2
- take the price of carbon emissions on 26 November 2008 from Point Carbon at: http://www.pointcarbon.com/ which gave a value of €15.70 per tonne
- do a conversion from Euros to Pounds giving £13.36 per tonne and multiple that by 1.342 tonnes
- and come up with £17.93 compared with the current Air Passenger Duty (APD) of £40, the proposed APD of £55 from 1 November 2009 and the proposed APD of £85 from 2010 (see: http://www.hmrc.gov.uk/pbr2008/pbrn20.pdf ) or do I misunderstand the basis of how HM Treasury arrived at the rates for this “green” tax?

New Zealand's recent treaty negotiations

Just about hidden away on the web site of the New Zealand Ministry of Foreign Affairs and Trade is the International Treaties List, a publication produced every six months that gives some details of all the treaties that the New Zealand Government is negotiating, concluding, ratifying or amending. This includes air services agreements.

The 61-page July 2008 edition on pages 59-60 refers to New Zealand's air services relationships with Canada, the European Union, the Philippines, South Africa, Sri Lanka, Turkey and the United Kingdom. It gives the dates of recent negotiations and also lists me as the official contact for these.

The Box

The BBC is following a shipping container around the world for a year and has a page for The Box complete with related stories and GPS tracking of its location.

The container started out in the UK with a shipment of Scotch whisky bound for China and is now headed for the USA full of consumer goods (HT to Transport Blog).

Rise in piracy

This year has seen increasing news reports of piracy, particularly off the coast of Somalia.

An excellent source of data for this growing problem is the International Chamber of Commerce's International Maritime Bureau which operates a Piracy Reporting Centre based in Malaysia. The Centre maintains a live piracy map of all such incidents around the world.

New Zealand Aviation Overview published

The New Zealand Ministry of Tourism this month published a 22-page New Zealand Aviation Overview bringing together data from a variety of sources.

EU Ministers grant EC mandate to negotiate new ASA with Lebanon

At their 9 October 2008 Transport, Telecommunications and Energy (TTE) Council meeting held in Luxembourg under the French Presidency, European Transport Ministers decided to grant the European Commission a mandate to open negotiations with Lebanon on a comprehensive Euro-Mediterranean air transport agreement.

UK plans sharp increases in Air Passenger Duty

In its Pre-Budget Update on 24 November 2008 the UK Government announced that it planned to increase its Air Passenger Duty (APD) and restructure it to move from two to four bands based on distance.

In his speech the UK Chancellor said:

"As the Government has demanded, aviation will now be included in the emissions trading scheme from 2012.

This is a major step towards achieving our environmental objective of reducing the impact of aviation on climate change.

It has enabled me to look again at our proposals for reforming air passenger duty.

Mr Speaker, last year, there was cross-party support for a reform of air passenger duty to a tax per plane.

As much as I am in favour of a bipartisan approach, it seems in this case not to have reached the right conclusion.

This proposal could harm the aviation industry at a time when it is facing huge problems.

So instead I have decided to reform APD into a four-band system ensuring those that travel further and have a larger environmental impact meet that cost.

I believe this will be effective in reducing emissions from aviation."

Details are contained in Chapter 7 of the 2008 Pre-Budget Report and a release from HM Revenue & Customs. The latter details the impact on travel to individual countries.

HM Treasury also released a 37-page response on the consultation it had done on moving from a per passenger to a per plane charge.

UK media coverage included that from:

• The Independent
  
• the Telegraph
• the Times
• the Guardian
  

Airline reaction came in media statements from:

• IATA
• the European Low Fares Airline Association (ELFAA)
  
• the British Air Transport Association (BATA)
  
• Ryanair
  

ABTA - The Travel Association also commented.

The announcement came the day before New Zealand's New Prime Minister, John Key, met with UK Prime Minister, Gordon Brown.

NZ media coverage included that from:

• the National Business Review
• the NZ Herald - editorial
  

Tourism is New Zealand's largest export earner and the UK is New Zealand's second largest visitor market.

Australian reaction was reported in The Age.

Belgium drops idea of taxing air passengers

On 7 November 2008 the Association of European Airlines (AEA) commented on the decision of the Belgian Government dropped its plan to impose a ticket tax on air passengers. The AEA noted similar moves in Denmark last year and in Malta this month.

Fiji Budget increases departure tax

The Fiji Times reported on 25 November 2008 that the 21 November 2008 Fiji Budget included an increase in departure tax to F$75 from 2009. The current level is $F40 per person and the increase is to come into effect on 1 January.

Irish Budget introduces Air Travel Tax

The Irish 2009 Budget announced on 14 October 2008 that an Air Travel Tax would be introduced from 30 March 2009. The general rate applying will be €10 per passenger with a lower rate of €2 for shorter air journeys (those under 300 kms). The tax will be payable by the appropriate airport authority to the Revenue Commissioners in respect of passengers departing from Irish airports. In effect the airport authority will collect the tax from the airlines.

Even before the official announcement, on 13 October 2008 Ryanair was reacting to accurate speculation about the tax and followed up with a further statement on 17 October.

Air New Zealand-owned A320 crashes into Mediterranean

Friday, 28 November 2008, was one of those days I dread. I usually check the web first thing in the morning and was horrified to see the early reports that an Air New Zealand-owned Airbus A320, in the process of being returned from XL Airways Germany, had crashed into the sea off France near Perpignan. I soon learnt that someone from our Civil Aviation Authority was suspected to be on board.

Air New Zealand has issued a series of media releases on the crash as have various official bodies (not all are available on the web yet).

Air New Zealand:

Incident 0829 28/11
Update 1438 28/11
Update 1724 28/11
Update 2146 28/11
Update 0600 29/11
Update 0900 29/11
Update 1328 29/11
Update 2030 29/11
Update 0807 30/11
Update NEW 1028 2/12
Update NEW 1328 2/12
Update NEW 1512 7/12
Update NEW 1528 13/1
Update NEW 1229 15/1
Update NEW 19/1
Update NEW 20/1
Update NEW 1449 20/1
Update NEW 22/1
Update NEW 23/1

Bureau d'Enquetes et d'Analyses (BEA):

Accident on approach to Perpignan 2008 27/11
Accident on approach to Perpignan 2008 NEW 3/12

Civil Aviation Authority of New Zealand:

CAA staff shocked by accident involving missing colleague NEW 28/11

New Zealand Prime Minister:

Statement on Air New Zealand plane crash 28/11

New Zealand Minister of Transport:

Government concerned for Air NZ & CAA staff on crashed Airbus 28/11

There is no point in speculating as to exactly what happened. That usually takes time to establish but I hope that the accident investigators are able to find some answers that we can learn from and that the investigation does not become entangled in judicial proceedings.

At the time of the crash, the aircraft was still on the German registry as D-AXLA, having not yet been handed back to Air New Zealand, but it had already been repainted in Air New Zealand colours. Seeing a photograph of the tail fin with the koru floating in the sea was particularly hard. The accident happened on the 29th anniversary of the Erebus tragedy, a day I still remember well. I was studying at Otago University in Dunedin then.

Rest in peace guys.

New Zealand has a new Minister of Transport

Recently elected New Zealand Prime Minister John Key has appointed new list Member of Parliament Steven Joyce to be New Zealand Minister of Transport. Joyce took office on 19 November 2008 and replaces Annette King (now Deputy Leader of the Opposition), Harry Duynhoven and Judith Tizard. The latter two lost their seats in Parliament in the 2008 election.

The NZ Herald carried a profile of Joyce on 5 September 2008. He is a zoology and economics major with a business background, most recently as CEO of Jasons Travel Media and General Manager of the National Party.

In a new innovation there is now also a Minister of Infrastructure, Deputy Prime Minister Bill English.

Attempt underway to set around the world via the poles speed record

Tag Trans Polar 08 is currently attempting to beat an FAI 54 hours, 7 minutes and 12 seconds speed record set in 1977 by a Pan American B747SP for a circumnavigation of the globe via the North and South Poles.

The Bombardier Global Express aircraft touched down in Christchurch, New Zealand early this morning local time for only 31 minutes.

The planned routing is Farnborough-Whitehorse-Majuro-Christchurch-Punta Arenas-Sal-Farnborough. (HT to MRC Aviation which provides very good coverage of non-scheduled international operations through New Zealand.)

ACCC draft decision rejects Air Canada/Air New Zealand commercial alliance

On 20 November 2008 the Australian Competition and Consumer Commission (ACCC) announced that it had reached a draft determination to reject an application from Air Canada and Air New Zealand to enter into a cooperation agreement for services between Australasia and North America that would involve revenue pooling. Qantas and Singapore Airlines made submissions on the application.

On 21 November 2008 The Australian carried a report by Steve Creedy on the draft determination and BusinessDay reported NEW a response from Air New Zealand.

Air New Zealand makes an interesting point about past ACCC approvals of the arrangements between Qantas and South African Airways on the Australia-South Africa route. It is also notable that by not fully liberalising its air services arrangements with countries such as Singapore and Canada, the Australian Government has blocked entry by potential competitors into the Australia-mainland USA market. It would seem that this has been deliberately done to protect the launch of V Australia into this market. However, a submission from the Australian Department of Infrastructure notes that Australia intends to enter into air services negotiations with Canada "in the near future."

Air services arrangements between Saudi Arabia and the UK criticised

On 4 November 2008 the Telegraph reported on criticism from Sir Michael Bishop, who is selling his controlling share in bmi to Lufthansa, of new air services arrangements negotiated between the United Kingdom and Saudi Arabia in July.

Kuwait and Singapore reach "open skies" agreement

On 4 November 2008 the Civil Aviation Authority of Singapore (CAAS) announced that Singapore and Kuwait had concluded an "open skies" agreement. This takes the number of countries Singapore has "open skies" arrangements with to more than 30.

More direct transport links between Taiwan and the Mainland

On 4 November 2008 China Daily reported on the further opening of transport links between Taiwan and the Chinese Mainland following the signing of agreements between the mainland's Association for Relations Across the Taiwan Straits and the Straits Exchange Foundation (see previous post).

The permitted number of charter flights will be tripled to 108 per week and will be able to operate every day of the week (an agreement signed earlier this year permitted operations on only four days per week). New direct air routes will be introduced saving fuel and emissions as current flights are required to transit Hong Kong air space. Sixty direct cargo flights per month will also be possible.

Direct shipping links will be opened.

On 5 November 2008 Taiwan News carried a story on the negative impact the move is likely to have on Hong Kong.

Cartograms of the US Presidential Election Results

For some excellent cartograms of the United States 2008 presidential election have a look at the work of Physics Professor Mark Newman and colleagues.

They have also done cartograms of the 2004 election.

The cartograms cover both state and county level results. The area of a state or county is based on its population or number of electoral votes rather than land area.

Who to vote for?

A new weblog, Pundit, has a useful Election 2008 Party Quiz to help New Zealand voters decide which party best matches their views on the issues that are important to them.

It also links to the original US Presidential Quiz from Glassbooth.

My personal results? In New Zealand three parties are very close with a fourth not far behind and I still haven't finally decided which way my two votes will be cast on Saturday. As for US, I am glad I am not voting there because my quiz input on the issues results in an exact tie between McCain and Obama!

Anyway whether you are in the United States or New Zealand this week the most important thing is that if you are eligible you exercise your democratic right to vote. At times we may wish that we had a better system of selecting our governments, but a democratic system can only survive if we all support it.

And have fun watching the results roll in on the night.

Outcome of IATA Istanbul Summit

On 26 October 2008 the International Air Transport Association (IATA) issued a Press Release on the outcome of its Agenda for Freedom Summit in Istanbul (see previous post). The opening Remarks of IATA Director General Giovanni Bisignani and the Summary of the Chairman, Jeff Shane, are also available.

Three key outcomes are stated to have emerged:

• The participants asked IATA to continue to facilitate this discussion with a second meeting in early 2009 to turn the discussion into action.
• They also asked IATA to facilitate the development of a multi-lateral statement of policy that would be a powerful tool expressing the common thinking and approach of the group of states.
• Finally, the group agreed to spread best practices in liberalisation by making more openly available to all states the most liberal agreements that are being negotiated.

On 30 October 2008 The Economist carried a story on the outcomes.

US Department of Justice clears Delta takeover of Northwest

On 29 October 2008 the Antitrust Division of the United States Department of Justice issued a statement in effect clearing the way for the merger of Delta Air Lines and Northwest Airlines. The US$2.6 billion all-stock takeover has created the largest airline in the world. Reuters reported on the news.

EU Council finalises Directive to include aviation in ETS

On 24 October 2008 the Council of the European Union approved a directive bringing into law the inclusion of aviation in the European Union's Emissions Trading Scheme. A press release announced the decision (see previous post).

The United States Ambassador to the European Union, Kristen Silverberg, has written a letter to the European Commission dated 30 October 2008 reiterating US concerns.

Press releases reacting to the Council decision came from IATA, the Association of European Airlines (AEA) and the ELFAA.

EurActiv.com has a "links dossier" providing access to background on the aviation and emissions trading issue.

Political Party Transport Policies for the New Zealand Election

On 31 October 2008 the NZ Herald carried a story by Mathew Dearnaley headed "Transport a bandwagon everyone's happy to ride" and a table on the transport policies of the parties contesting the New Zealand General Election on 8 November 2008.

Policy.net.nz has a page on party transport policies.

Treemaps

Panopticon has a fascinating demonstration gallery of its data visualisation software. As well as the financial data that one might expect and a few treemaps that you might not expect, for those interested in aviation there is a treemap of airliner crashes covering the period 1968-2008. This can be varied by airline and by aircraft manufacturer. The data source used is AirDisaster.Com.

Aerolineas Argentinas to be expropriated?

Reuters is carrying a report dated 23 October 2008 that the Argentine Government is considering expropriating Aerolineas Argentinas. The government had been in talks to buy the airline (see previous post).

The airline is unusual in that it is foreign owned and controlled by Spanish interests, the Marsans group, probably giving many of Argentina's bilateral air services agreement partners the right to refuse to grant it operating authorisation. To my knowledge none have done so.

Air New Zealand reviewing services beyond RAR, TBU and APW to LAX

Television New Zealand and the Samoa Observer are carrying reports dated 26 October 2008 that Air New Zealand is seeking government subsidises if it is to continue its weekly services beyond Nuku'alofa, Apia and Rarotonga to Los Angeles.

The non-stop service between Rarotonga and Los Angeles is already subsidised by the Cook Islands government.

EC's Calleja addresses IAC

Against the background of the resumed air transport negotiations between the European Commission and the United States, on 23 September 2008 Daniel Calleja, the Director of Air Transport at the European Commission delivered a speech to the International Aviation Club in Washington DC.

Jetstar's New Zealand aspirations

On 24 October 2008 The Australian carried a report by Steve Creedy quoting the new Chief Executive of Qantas-subsidiary Jetstar, Bruce Buchanan, about the airline's aspirations for New Zealand operations.

It is becoming increasingly clear that the Boeing B787, with its size/range combinations, is likely to play a major part in New Zealand's aviation future.

Global Financial Crisis Impacting on New Zealand Visitor Arrivals

For some months now I have been getting rather gloomy about New Zealand's international visitor numbers. Having been hit by a supply shock in the form of rising jet fuel prices, airlines are now being hit by a demand shock and those that plan to survive will need to make some tough decisions. Those people that wish to see aviation emissions reduced and aircraft grounded may be in luck the way things are going, in the short term at least.

The September 2008 New Zealand International Visitor Arrivals:

• Australia 82,317 down 2.6%
• UK 10,580 down 5.3%
• USA 9,131 down 11.6%
• Canada 2,139 up 12.0%
• China 5,497 down 33.2%
• Korea 4,577 down 30.7%
• Japan 6,486 down 22.1%

The total number was down by 6.6%.

Will the recent dramatic fall in the value of the NZ$ start to have a positive impact in some of these markets?

The NZ Ministry of Tourism does a good monthly analysis of this data in a Commentary and its Tourism Leading Indicators Monitor. I look at the provisional numbers that come through every Friday and at my work we also have the raw data direct from Statistics NZ. The NZ Ministry of Transport is the only one that gets the airline-by-airline statistics as, unlike in Australia for example, here they are regarded as commercially sensitive.

Fuel hedging by Air New Zealand

As well as hedging their foreign exchange exposure, volatility in the price of jet fuel leads to airlines hedging to achieve a degree of certainty about their costs going forward. Air New Zealand publishes its position here on its web site every quarter.

The latest announcement has just been covered in a story dated 24 October 2008 by Denise McNabb from The Independent. Given the dramatic fall in the price of oil, it is quite interesting. There have recently been some painful losses for the latest quarter announced by airlines in the United States as a result of having to mark to market their fuel hedging.

A data series and graphs on the Singapore jet fuel spot price are available from the US Energy Information Administration (see previous post). I have installed a widget giving the price of crude oil in US$ on the left hand side of this weblog.

Deadline for Canada-EU air services negotiations

On 17 October 2008 during the visit of the French and European Commission Presidents to Quebec City the Prime Minister of Canada Stephen Harper announced that he "... welcomed the decisive progress toward the negotiation of a comprehensive air transport agreement between Canada and the EU. He, along with EU leaders, directed negotiators to conclude the agreement by November 30, 2008. This agreement will improve connections between markets and create new opportunities for the air sector."

Back on 29 May 2008 the Canadian Minister of Transport noted that there had by then been three rounds of negotiations. The first round was held in Brussels on 27-28 November 2007 (Canadian statement)(see previous post).

US domestic air transport deregulation 30 years later

This week saw the thirtieth anniversary of the economic deregulation of the US domestic airline industry under the Carter Administration.

To mark the occasion on 23 October 2008 the Antitrust Division of the US Department of Justice held a Workshop on Airline Competition at which some of the leading academics in the airline field presented papers (HT to Aviation Law Prof Blog).

Also marking the occasion were three articles complete with commentaries in the Summer 2008 issue of the Houston Law Review and a short article, Why You Hate to Fly, by Evan Sparks in The American magazine.

Bill Swelbar from MIT has four postings on his weblog:

• Economic Impact of Commercial Aviation
• Triangulating Southwest to the Point of Indifference
  
• Management and Labor
• Stakeholder Winners and Losers NEW
  

The second posting finishes with an intriguing comment: "In the future, look to the horizon for the new competitive battleground. It will be more about Auckland than Amarillo. It really will."

To cap it off Kieran Daly noted that, one of the biggest beneficiaries of deregulation, Southwest had just announced its first quarterly loss in 17 years as a result of having to mark to market its fuel hedging.

I remember in the 1980s reading that the airline industry was proving to be less contestable than the advocates of economic deregulation had thought it would be. The industry certainly has had a bumpy ride from a financial perspective but consumers have enjoyed huge benefits. I continue to have an open mind as to whether the economic policy advisers and regulators, of which I am one here in New Zealand, have it right. The above links point to plenty of food for thought.

IATA Agenda for Freedom Summit in Istanbul

IATA is meeting back in Istanbul on 25-26 October 2008, this time with officials from 15 governments (Australia, Brazil, Canada, Chile, the European Commission, India, Mauritius, Morocco, Panama, Singapore, Switzerland, Turkey, the United Arab Emirates, the United States of America and Vietnam) in an Agenda for Freedom Summit to discuss ways of freeing up the government-imposed economic restrictions that international airlines operate under.

The Baltic Dry Index sinks

On 24 October 2008 Bloomberg reported that the Baltic Dry Index (BDI) has fallen 90% since May 2008 (see chart). On 16 October 2008 the Financial Times carried a story on this drop.

The BDI measures the cost of chartering large bulk ships and is regarded as a leading indicator of global economic activity. Back on 24 October 2003 an article by Daniel Gross in Slate described it as the best economic indicator you've never heard of.

With such developments as this and the fall in the price of oil maybe the world is getting smaller again (see previous post).

Gongoozling

An article published by The Economist on 18 September 2008 increased my vocabulary. I had never come across the word Gongoozler before. It seems that it is the canal equivalent of a train or plane spotter.

These days what is left of the UK canal network is maintained by British Waterways. I have been to the National Waterways Museum in Gloucester.

The US concludes "open skies" agreements with Armenia, Laos and Vietnam

On 7 October 2008 the US Department of Transportation announced that the United States had concluded a new "open skies" agreement with Armenia, and "open skies" with Vietnam with respect to cargo-only air services. An "open skies" agreement with Laos was announced by DoT on 3 October 2008.

This brings to 94 the number of "open skies" relationships that the United States has reached. Note that ICAO has 190 Contracting States so the US is now just under half way through all the possible "open skies" relationships that it could have.

A sea of red - following the US stock markets

Some time ago I linked from my Economics home page to the SmartMoney.com Map of the Market. It is what is called a treemap and shows a map of US equities with the area for an individual company varying by market capitalisation and the colour by whether the stock has risen or dropped in price.

I recently came across a much more comprehensive data visualisation source, FINVIZ.com (HT to information aesthetics). Currently it presents a gloomy picture but perhaps points to some buying opportunities for those that are contrarian. To quote Warren Buffett in an opinion piece in The Times on 19 October 2008: "Be greedy when other are fearful and be fearful when others are greedy."

The market capitalisations of the major US airlines are now so small that they are actually quite hard to find on this visualisation tool - do not expect to find them in the S&P 500 view - look in the Full view in the Services block on the right near the bottom under "Maj".

Interactive graphic of the current bear market

The New York Times has an excellent interactive graphic dated 11 October 2008 comparing the current bear market with past ones in terms of severity and length as measured by the S&P 500 and Robert J. Shiller from Yale.

Plane Truths report from new economics foundation

On 27 September 2008 the new economics foundation and World Development Movement published their 60 page report Plane Truths: Do the economic arguments for aviation growth really fly? A summary statement talks about three "fossil-fuelled fantasies".

Fiji to join the PIASA

On 7 October 2008 the Fiji Interim Government announced that Fiji intends to join the Pacific Islands Air Services Agreement (PIASA)(see previous post).

Given Fiji's central geographic location in the South Pacific and its past concerns about air services liberalisation, this is a significant announcement.