APD
If we assume that some form of APD devolution to Wales is to be announced soon, perhaps in the Budget next month as some commentators suggest, and possibly long haul APD in the first instance as recommended by the Silk Commission, it’s highly likely that CWL will find itself with a scheduled long haul route or two in the foreseeable future given that the Wales Assembly Government leadership has already committed itself to a nil rate APD.
I wondered how an airline might play it so let’s take as an instance a daily NYC route with an average load of 150 passengers throughout the year.
Currently such a load would generate just under £11,000 APD (at £73 per passenger from April) for each outbound flight - I’ve ignored premium passengers who would pay double the economy rate and under 16s who will pay no APD from next month.
That £11,000 per flight equates to around £4 million for the entire year.
Now an airline might set overall fares at a level that it would have done with APD still in place and pocket the £4 million now that it does not have to give that money to the UK government. Or perhaps it might reduce the fares to a degree in the hope that it can attract more passengers that would more than compensate for the lower fares and partial loss of APD equivalent. If it reduces its fares by the entire APD amount it will have to be confident that it can attract sufficient passengers to make good the £4 million that it’s decided to forego.
An airline might also be operating a route to the same NYC airport from a nearby English airport, say BHX, and might not want to dilute that route by offering lower fares from CWL so is it as straightforward as saying that every airline would reduce its fares at CWL by the entire current UK APD amount?