Oxygen Aviation
The New Tax Levy (APD)
01/04/2011
The Air Passenger Duty (APD) proposed on Private Jets by George Osborne in the March budget is designed to swell the government’s coffers by tens of millions of pounds. Although much has been made of this so called ‘Learjet Levy’, it is unlikely to affect the Private Jet user to any significant degree.
That said, it’s another of the ‘success taxes’ imposed by recent governments that claw away at the incomes of the higher earners in the UK.
If one considers the following example itineraries and apply the proposed taxes that are estimated at £12 for short haul and £120 for mid-haul the changes are put into perspective.
To fill a Private Jet to its capacity is like filling a luxury car with five people…still comfortable but not ideal for long journeys and no one wants that middle seat on the road-trip to Scotland. In our experience an average Private Jet will take to the skies with between four to eight passengers. With that in mind, the following scenarios illustrate the additional fees;
Short Haul
4 passengers London – Paris – London (2 nights in Paris)
Light-jet cost = GBP 5,000 (approx)
Cost per head Pre-APD = GBP 1,250
Cost per head Post-APD = GBP 1,262 (assuming £12 per departing passenger)
Percentage increase 0.01%
Mid-Haul
8 passengers London – New York – London (Friday-Sunday)
Heavy-Jet GBP 65,000 (approx)
Cost per head Pre-APD = GBP 8,125
Cost per head Post-APD = GBP 8,245 (assuming £120 per departing passenger)
Percentage increase 0.01%
At the risk of sounding arrogant, while these charges will have some impact, the people who base their decision on whether or not to charter because of an additional 0.01% shouldn’t be chartering aircraft in the first place. People charter an aircraft because of speed, convenience, facilitation of schedule and often purely for enjoyment. In terms of the business case for the expenditure, a minimal increase to ensure that you or your highest paid executives are not wasting so many hours at airports, when this time could be spent more productively than attempting to connect to the wi-fi hotspot in the lounges at London Heathrow Terminal 5, doesn’t seem so harsh.
Many passengers will expect the broker or the airline to take up this additional charge on their behalf as a gesture of goodwill and if Oxygen Aviation had to subsidise the client’s charter by 0.01% we would do so to maintain the relationship with the client. This will further squeeze the margins of the businesses that are providing the services but a good broker should be able to buy better and will have to negotiate harder in order to maintain its profitability levels.
Indeed, there are many influences that make up the costs of Private Jet usage; an extra $1 on a barrel of oil is more likely to have a bigger impact, currency exchange rates can be a disadvantage and APD increases can’t be overlooked, but the right broker researching the market is likely to save you more money than the cost of these factors.