Frontier report for Heathrow finds reducing APD could increase demand on domestic routes

Today, Heathrow Airport published a report drawing upon analysis from Frontier Economics to estimate the potential impact of reducing Air Passenger Duty (APD) on domestic routes in the UK. The ‘reduced’ rate of APD currently stands at £13 per passenger on most domestic routes. The analysis focusses on how a reduction in APD would lead to a reduction in ticket fares, which in turn would result in cost savings for domestic passengers and in turn would stimulate further demand.

The report finds that if APD were abolished, then on domestic routes at Heathrow alone, the cost savings for domestic passengers would be in the region of £24 million per annum, which would lead to an 8% increase in demand on domestic routes – equivalent to around 70,000 extra return trips per annum. And across all domestic routes, the total cost saving would amount to around £225 million per annum, leading to an additional 700,000 extra return trips per annum.

Frontier Economics regularly advises major airports and airlines on competition, regulatory and policy issues. For an overview of the potential impact of Brexit on the aviation sector, please refer to our recent bulletin ‘Over and out’.

For more information please contact Saskia Nett on s.nett@frontier-economics.com, or call +44 (0)20 7031 7000.

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