A controversial travel tax has been restructured to ease the price of airfares between the United Kingdom and Cayman, but taxes will still make up more than half of the total price of a ticket.
Tourism officials in Cayman welcomed the changes to the tax system, announced by U.K. Chancellor of the Exchequer George Osborne in his budget address Wednesday, because they eliminate an “unfair” structure that meant tourists were paying more in Air Passenger Duty tax to come to Cayman than they did to travel to more far-flung destinations like Hawaii and Los Angeles.
Abolishing a four-band passenger duty system, which bases taxes on the distance between London and a country’s capital, Mr. Osborne acknowledged it had been “crazy and unjust.” There will now be just two tax bands – one for flights within 2,000 miles of London and a higher rate for flights more than 2,000 miles from the U.K. capital.
It means that from April next year, travelers flying between Cayman and the U.K. will be charged a flat rate of £71 (US$117) on economy class tickets and £142 (US$234) on higher fares in Air Passenger Duty fees.
In real terms, the change will mean only a £14 (US$23) reduction economy class air fares between George Town and London. And the bulk of the ticket price is still eaten away by numerous taxes charged by both governments.
In a sample US$1,359.35 ticket, $690 is “the actual fare” and “the rest is taxes,” according to travel agent Steve Pillar.
The change has been welcomed by Caribbean tourism chiefs, but airlines have called for the tax to be cut further or abolished completely.
A spokesperson for British Airways said, “This is window dressing a tax that even George Osborne says is ‘crazy.’ The only long-term solution is to scrap APD in its entirety and allow the aviation and tourism industries to flourish.”
The Cayman Islands Tourism Association and other Caribbean organizations have been lobbying for reform of the passenger duty fees, which they believe negatively impact the tourism industry. Air Passenger Duty is an excise duty charged to passengers flying from United Kingdom airports.
Currently, Cayman falls into Band C of the four-band system, attracting higher fees than those in the existing Bands A and B. The Cayman Islands will fall into the new Band B category.
“The new Band B will be charged at the planned rate in 2015-16, £71 (US$117) for reduced rate passengers and £142 (US$234) for standard rate passengers,” Chancellor Osborne said.
Under the new system, from April 2014, economy class passengers flying from Cayman to the U.K. will pay £14 (US$23) less, and passengers flying in upper class will see a bigger reduction of £28 (US$46).
Tourism officials in the Cayman Islands have been lobbying for a reduction in air passenger duty since 2010.
“As a country, we have lobbied independently for this reduction and we are enormously pleased that our efforts have paid off,” said Tourism Minister Moses Kirkconnell. “We have also been supportive of the positioning taken by the Caribbean Tourism Organization who has been lobbying since 2010 for this reduction and other Caribbean nations who have been similarly affected by this restrictive fee.”
He added, “By having all long haul flights charged the same APD as travel to the U.S., we anticipate a levelling of the playing field and that this new reduced fee structure in turn should open up travel opportunities from the U.K. for leisure travellers. The Cayman Islands is looking forward to welcoming these long haul passengers in 2015 and beyond.”
Tourism officials believe the reduction provides a significant break for U.K. nationals considering traveling to the Cayman Islands or other Caribbean destinations over other countries. However, Mr. Pillar, general manager of George Town-based Travel Pros, does not believe the reduction in Air Passenger Duty fees will make much difference to individual passengers.
“All the taxes on the ticket are almost the [entire] price of the ticket. Air Passenger Duty is just a small piece of the pie. Any savings a passenger can make is great, but in the overall scheme of things, it’s [approximately] a $50 reduction. But it’s a step in the right direction.”
Mr. Pillar explained that while the duty reduction gives passengers a bit of breathing space, there are several other tax charges that bump up the price of air tickets.
Using the example of a British Airways economy class ticket to London from Grand Cayman that could be purchased this week for US$1,359.35, the air passenger duty is US$141, and other fees and taxes include: a US$1.25 terminal fee; passenger facility charge of US$15.90; security charge of US$10; international departure tax of US$37.50; a passenger service charge of US$66.10; and a fuel surcharge of US$397.60.
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I doubt that fuel surcharge is a tax. Can somebody comment if it is true? I always thought that this is one of the ways for air companies to show how much their prices are affected by oil prices – by splitting out the amount paid for fuel in ticket price? And if it is tax, who is getting it?
Stanislav, fuel charges are not a tax, they are an airline industry scam.
They were introduced years ago to deal with fluctuating fuel prices but have now become an integral part of the ticket pricing system.
As an example, they allow airlines to advertise 99p or 99c fare deals then charge passengers the true cost of their seats by adding a mythical fuel surcharge and other miscellaneous charges. I am not sure about the USA but in the UK and Europe it has become the way all airlines do business.
Why is it a scam? Because fuel surcharges have been increased at about twice the rate of actual fuel costs. In fact last year were taken to court over it.
And this change in APD will not make any difference at all to travellers from the UK as long as BA carry on charging more for economy seats on the LHR-GCM route that you pay for a two week all-inclusive holiday in Cuba.
BA never cease to amaze me. I just discovered that they are even linking the outbound and return flight timings to bump up ticket prices. On the MIA-LHR route moving my departure date back a day not only reduced the outbound fare by US800 but also the return fare dropped by the same amount. The total went from roughly US2800 to US1200 – how the heck do you justify that?
I am missing something here. The fuel surcharge goes to the airlines and is really part of the ticket price. Who are they trying to kid? The taxes are really not that much.