Is the increase in air passenger duty set to ground the aviation industry?

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The aviation industry has always been subject to significant amounts of legislation and on-going regulatory reform has been criticised by many as being counter-productive and costly. However, it is the increasing tax burdens faced by aviation companies which are causing concern within the industry. Despite implementing the world’s highest aviation taxes, the rate of air passenger duty tax is set to rise again as soon as April and the EU Commission has warned of plans to issue carbon emissions tax for airlines flying to and from member states.

The rise of air passenger duty by 2.5% per passenger will only affect those on long haul flights but will, for the first time, affect passengers travelling via private aircraft as well as passengers flying with commercial airlines. Although an increase of 2.5% may appear modest initially, it further increases the costs of businesses already struggling due to the turbulent economy. Whilst airlines have previously tried to pass the cost on to passengers, fears of losing custom has led many companies to try and absorb the costs thus cutting profits and increasing losses.

In order to deal with the tax increase, some aviation companies will consider the cost-efficiencies to be made through restructuring their businesses and streamlining operations. These companies, will require specialist aviation advice regarding the potential impact and risks of modifying operational processes. Due to the numerous regulatory requirements imposed on the aviation industry, law firms which specialise in aviation law and the travel industry are well placed to offer advice regarding potential restructuring plans. In addition to providing commercial and regulatory legal advice, law firms which specialise in aviation law are familiar with how the industry operates and can offer effective, commercial solutions to issues such as tax hikes.

The unique nature of aviation contracts means that lawyers with industry expertise and experience are required in order to facilitate effective negotiations and ensure the client achieves the best deal possible. By delivering commercial solutions as well as legal advice, aviation lawyers ensure that aviation companies are operating as efficiently as possible and maximising all growth opportunities. At a time when tax increases are limiting the potential for industry growth and consumers are struggling to meet increasing travel costs, specialist advice is crucial to on-going business success.

With increasing tax reform forcing some aviation companies to reduce their number of employees, restructuring the workforce is essential. Whilst many businesses modify the structure of their workforce, the unique nature of the aviation industry means contracts of employment often differ from standard contractual terms and firms often require employees to meet with industry-specific requirements. In such instances, the advice of specialist aviation lawyers can be instrumental in reducing costs whilst retaining an effective and productive workforce which meets with industry regulations.

Despite a struggling economy, the travel industry has been highlighted as a key area for growth and that potential still remains. Plans for a third airport close to the country’s capital and calls for a second runway at Gatwick are indicative of growth potential despite the threat of increasing taxes. Although companies operating within the aviation industry may struggle to bear the cost of increasing taxes, by committing to potential restructuring and using the assistance of specialist aviation lawyers to meet their legislative requirements whilst operating cost efficiently, aviation companies may be able to ride out the losses incurred through funding the tax increases and achieve the growth that many believe the industry is capable of.

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March 1, 2013 · Tim Kevan · Comments Closed
Posted in: Uncategorized