Could the writing be on the wall for low cost airlines operating out of the UK and other European countries as the Conservative Party – once a campaigner and implementer of lower taxes – has called for purchase tax to be introduced to domestic flights?
The tax would add up to 17.5 per cent on to the cost of a flight from one British city to another, but while flights to the European mainland and popular holiday islands such as Menorca aren’t specifically mentioned, one travel company believes the new policy will inevitably lead to higher fares for flights not just within Britain, but elsewhere too.
The Tory policy review calls for the UK to be a leader on green growth, noting that it was illogical for flights to attract less tax than cars and trains, with David Cameron, the Tory Party leader, saying that much of the report would be included in their manifesto at the next British General Election, which at the time could have been just weeks away as election speculation mounted in the UK, but is now likely to be in 2009 or 2010 following British Prime Minister Gordon Brown’s decision not to hold an early poll.
‘It’s not so much that we’re convinced the Tories will win the next election and tax domestic flights’, say the travel company, ‘But by proposing new taxes on flights it leads the door open to the Labour Party, who are more likely to win, to use taxes on flights as a revenue raiser with no opposition from the Tories who are traditionally seen as the tax cutting party. We have no doubt that flights will be taxed a lot more in 2008 because the Tories have now made it a soft target for the British government of any political persuasion and the Treasury when they prepare their annual budgets.’
In a pre-budget statement to the House of Commons, the first for new Chancellor Alistair Darling and the first major government statement after Prime Minister Gordon Brown opted not to call an early election, a shift was made away from taxing passengers to planes, making half full flights less financially viable, with a start date of November 2009.
Citing Menorca as an example, the company points to the holiday industry on the island being a major employer, and the Menorca map changing over the years as new resorts have been built to accommodate additional visitors.
‘One of the other aspects of the report that is a worry for the holiday industry’, continues the travel company, ‘Is that new runways at Stansted, Gatwick and Heathrow Airports are all ruled out – all three airports serve London and the South-East of England. Any increased demand for example for Menorca holidays probably won’t be able to be met without increased capacity, inevitably leading to a consequence of higher prices overall.’
From the environmental lobby the Green Party described the proposals as ‘fiddling around the edges when what is needed is urgent and radical action’, adding that the Tory eco-taxes would hit the poorest in society hardest.
Taking Menorca as typical of the areas that could be affected most by additional flight taxes, the travel company takes the view that any downturn in visitor numbers and the volume of bookings for holidays and hotels in Menorca would hit an island that relies heavily on tourism.
The Spanish island is currently served by three UK airlines that offer scheduled flights, including one low cost carrier that offers cheap flights to Menorca. But there are a high number of holiday companies who offer chartered flights in the summer months, and these companies have helped reduced prices for holidaymakers visiting the island. Neighbouring island Majorca attracted most UK tourists for 2007, beating off competition from low cost destinations in Eastern Europe, and Menorca has also benefitted from an increase in visitor numbers.
Despite their geographical closeness and being part of the same group of islands, the Balearics, Menorca and Majorca attract a different type of tourist from each other, and with Ibiza the third of the islands each has its own appeal, and each her unique selling points when compared to each other.
Ibiza is known in Europe for her clubs and nightlife, with 18 to 30’s and their high disposable incomes preferring the island to quieter Majorca and Menorca. A survey by the island’s tourist board sprung a surpise for many in the hotels and holidays industry with a report showing of the three islands that Ibiza’s visitors spent more on their holidays than those in Majorca and on holiday in Menorca.
Majorca is a favourite holiday island for both the British and Germans, and as well as having a cosmopolitan feel to it offers both nightlife for the young with luxury hotels and villa holidays for older visitors. Plans are in place to build Spain’s top luxury hotel on the island.
The island of Menorca, also known as Minorca, is regarded as the quietest of the three holiday islands, and family orientated, with tourists just as likely to be taking a villa holiday with companies like James villas as they are staying in a hotel or holiday apartment. The island is at her best in May and September when the island’s roads are quiet but everyone is geared up for the season.
The travel company who produce YourMenorca.net concludes that all three islands would be affected detrimentally by any further increases in taxes on flights, and infrastructure improvements planned for the future might have to be reconsidered if the number of tourists visiting for a holiday comes down.
Minorca will be watching the British political scene with an unusual amount of interest 2008.