Air passenger duty cut 'in Northern Ireland 'not value for money'

Northern Ireland's airports have lobbied for a cut in the tax

Cutting air passenger duty (APD) would not deliver value for money, according to a new report drawn up for Northern Ireland's Department for the Economy.

APD is a tax levied on air passengers, which varies according to destination and class of travel.

The report said cutting the tax could help develop new air routes but would be costly.

APD does not apply on long haul flights from NI and airports have lobbied for it to abolished on short haul.

The DUP wants APD to be cut in Northern Ireland and the idea is being examined by a "technical working group" as part of the party's confidence and supply agreement with the Conservatives.

Air passenger duty was cited by Ryanair as one reason for reducing flights from Belfast International Airport.

Block grant cut

The report by Oxford Economics said extending the APD cut would "likely be relatively effective as a means of increasing Northern Ireland's aviation connectivity."

However it added that the policy is "unlikely to deliver value for money" as Northern Ireland's block grant would be cut to reflect the reduced revenue going to the Treasury.

It said it would also amount to an implicit subsidy to "a large number of already commercially-viable routes."

The report focused on how to develop new air routes to economically important destinations like the United States, Germany and the Gulf states.

Co-operative marketing

The report suggested the most realistic policy is to invest more in "co-operative marketing agreements."

This means economic development and tourism agencies, airlines and airports jointly spending money to promote and market new routes.

It found that in Scotland and Wales, co-operative marketing arrangements have been used to attract long-haul services.

Co-operative marketing support is currently provided to Northern Ireland's airports through Tourism Ireland.

United's previous route from Belfast to New York was not subject to APD

'Important component'

The report also recommended that the zero APD rate on long haul flights be maintained as it "is likely to be an important component of securing the long-haul priority routes."

The zero rate was largely aimed at supporting a direct service between Belfast and New York.

However it was not enough to maintain that route, with United Airlines ending its service in 2017 and Norwegian pulling out in 2018.

The report nonetheless concludes that a "latent commercially viable market for a transatlantic route from Northern Ireland exists."