Sunday 22 April 2018

Walsh wants UK tax axed to boost low-cost Aer Lingus competitor

Fierce competition on transatlantic routes is taking its toll

IAG chief Willie Walsh has launched a drive to boost low-cost airline Level
IAG chief Willie Walsh has launched a drive to boost low-cost airline Level

Fearghal O'Connor

IAG boss Willie Walsh has launched a bid in the UK to have passenger taxes axed to allow his new low-cost airline to launch US flights from Britain's regional airports.

If Walsh is successful in his bid to open the routes by IAG's new carrier Level they would be in direct competition with Aer Lingus.

The Irish carrier, also owned by IAG, has had huge success marketing its own US-bound flights to British passengers willing to transfer in Dublin rather than travel via London Heathrow but it has previously warned staff that the parent group could look to introduce competition between the two should costs rise.

New competitively priced routes out of Birmingham, Cardiff, Edinburgh and Manchester would likely dent Aer Lingus's growing transfer market, which has seen Dublin airport's status as a transatlantic hub grow.

Level launched flights from Barcelona to the US and Latin America last year and will fly from Paris to the Caribbean and North America in July with fares that start at around £88 one way.

But in a letter to British members of parliament, Walsh said that "British consumers are losing out because of air passenger duty", a tax which can amount to almost as much as the standard price of a Level ticket.

"In Spain and France, Level can offer lower fares than it can in the UK - and that goes for other long-haul low-cost airlines too," said Walsh. "MPs need to know that air passenger duty undermines our ability to introduce new low-cost flights that would benefit their constituents. If air passenger duty was axed, IAG could open new routes and operate Level from regional airports."

Walsh said that "by hiking air passenger duty in the last budget, it's clear the chancellor doesn't understand that Britain is losing out to countries that don't have draconian aviation taxes".

Irish airlines also blamed the introduction of a travel tax in Ireland in 2009 for damaging passenger numbers at Irish airports before the Government scrapped the tax in 2014.

In a letter last year, Aer Lingus chief operating officer Mike Rutter said: "If Aer Lingus is unable to remain competitive in the medium term, then as a rational parent company IAG has the ability to move these aircraft to launch new routes and grow the networks of other IAG companies, of which Level would be most relevant in this context."

But the arrival of Level would only be the latest addition to the rapidly increasing competition that the successful Aer Lingus model is up against on transatlantic routes. Industry publication Flight Global reported that Irish-based carrier Norwegian plans to base Airbus A321LRs, the new long-range version of the popular short-haul aircraft, in the UK to serve US east coast and midwest cities from 2019.

Last October, Aer Lingus also announced that it is to get eight of the A321LRs by 2020, allowing it to almost double its transatlantic traffic to 4.5 million passengers.

Last week, Airbus announced that the A321LR had completed a Paris to New York non-stop test flight, marking an important milestone in the aircraft's development. First customer delivery of the A321LR is expected in late 2018. The aircraft is capable of handling up to 240 passengers in a single-class layout and has a range of 4000 nautical miles.

But there have been some signs that the growing competition on transatlantic routes is starting to takes its toll.

After a period of rapid expansion it was reported that Icelandic budget carrier Wow Air will "pause" its Reykjavik-Miami schedule this spring, a year after it was launched.

Iceland, like Ireland, has worked to become a transit point for low-cost travel between Europe and the US. Recent fare sales by Aer Lingus, Norwegian and Wow are a further sign of intense pricing pressure in the market.

Sunday Indo Business

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