APD and SAF mandates could dampen travel demand

Increases to Air Passenger Duty, combined with SAF mandates imposed without incentives, will lead to a reduction in travel by 2030 as costs are passed on to passengers, said Virgin Atlantic CEO Shai Weiss at a travel industry event yesterday.

Speaking at the Business Travel Association’s Spring Conference in London, Weiss said the airline and wider industry is supportive of what appears to be an imminent SAF mandate announcement from the UK government, but that if it is imposed without support for sustainable aviation fuel (SAF) production or airline incentives, the cost of travel is going to rise.

“The government promises incentives but it’s us [the airlines] that have to fund it [SAF production]. And if it’s the airlines that have to fund it, guess who’s going to help fund it? You [passengers] are going to have to share in that economic activity,” said Weiss. “Without any action we will see a reduction in travel demand by 2030 due to increased pricing. That’s a natural position to be in.”

Weiss said a “worst case scenario” would see the introduction of a mandated but insufficient SAF production. As a result, airlines would have to pay a “buyout” which is “three to five times more expensive than traditional jet fuel”. “That translates to $20 to $30 per ticket that is passed on to our collective customers and, with the APD increases, what do we see? A reduction in travel when everyone else is increasing travel. That’s what’s going to happen in this country.”

The UK government is expected to pass legislation in the coming weeks that will require airlines taking off from the UK to use at least 10 per cent SAF by 2030 which would mirror an EU mandate already in place. The current government has already committed to introducing the SAF mandate as a policy.

Pointing to Virgin Atlantic’s operation of the first transatlantic flight powered entirely by SAF last autumn, Weiss said: “We’ve shown it’s possible so now we need to make sure the fuel is abundant. We need a 100 to 150 times scale-up to get to the SAF mandate level. I expect that legislation to be passed but I’m not expecting to see production scale-up because I don’t think the incentives are going to be created.”

Weiss said the government’s announcement last week of an increase in PPE for non-economy passengers was “absolutely short-sighted”. He added: “Our passengers have to support the government’s candy shop approach to taxation in my mind is a flaw. This industry is already taxed through the roof. At a time when this country needs economic growth the government taxes us. This approach to business is disappointing.”