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Soapbox: Time to Re-Engage

David Scowsill

David Scowsill, President & CEO, World Travel & Tourism Council (WTTC)

Despite unprecedented economic and political challenges, travel and tourism has continued to grow in most countries throughout 2011. And while we do not yet know what 2012 has in store, we do know that the industry is resilient. WTTC’s latest 2011 estimates point to 3%  growth in the industry’s contribution to global GDP and, according to the World Tourism Organization (UNWTO), international arrivals will be up more than 4%. Current growth forecasts for 2012 are also positive—between 3% and 4% in both GDP contribution and international arrivals.  

This growth increasingly will be driven by China, India, and other emerging economies as their populations become richer. Travel and tourism GDP in China is set to grow 8.7% in 2012, with 6% and 7% growth in  India and Southeast Asia respectively, boosted by massive investments in infrastructure. China alone will have 12 new runways come online in 2012.

In the United States, 2012 is an election year and with high unemployment rates and slow GDP growth expected to persist throughout the year, travel and tourism will do well to hold up to the forecast 1% growth in GDP contribution.

While the airline industry is in buoyant shape in some areas, it is showing continued weakness in others, with overall airline performance being broadly linked to regional economic conditions. The problems besieging the airline industry have left it looking very isolated within the wider travel and tourism industry.

A few decades ago, airlines used to be full-service travel companies at the heart of our industry. Hilton was owned by TWA until it was sold to United’s parent company, which also held the Westin and Hertz brands, and founded Apollo, which became Galileo. American Airlines launched and owned Sabre, which led to Travelocity; SAS was a major shareholder in the InterContinental Hotel Group, operated hotels under its own name until 2006, and in 1987 it co-founded Amadeus along with Air France, Lufthansa and Iberia; British Airways created the Air Miles marketing concept. I could go on.

The most profitable parts of these companies have been sold to form major, global corporations in their own right and today, airlines resemble transport logistics businesses, substantially disengaged from the wider industry. For understandable economic reasons, airlines focus on survival first and engagement second.

Nowhere could this be clearer than in the industry’s need to speak with one voice to oppose punitive legislation, such as the United Kingdom’s Air Passenger Duty (APD). APD has always been a blunt instrument and a bad tax. Whether in its current per-passenger form or as a per-plane version, it is bad for the  consumer and bad for the international competitiveness of UK companies. APD does  not go towards any aviation or transport projects; it provides no incentive  for airlines to operate newer, cleaner aircraft or for the consumer to  choose “greener” options.

This bad tax was made even worse in 2009 with its discriminatory distance-based approach to long-haul destinations—for example, the Caribbean is closer to the United Kingdom than the United States’ West Coast, yet it is in a higher band.

The United Kingdom should learn from neighboring countries such as the Netherlands, which repealed a $412 million departure tax because it cost the economy $1.6 billion.

According to the UK Treasury’s own consultation document, aviation creates more than 250,000 jobs directly, and supports an estimated 200,000 through the supply chain. It is also a principal artery  for the wider travel and tourism industry, which contributes $165 billion (GBP105 billion), or around 7%, of the UK’s GDP and supports 2.3 million jobs.

Despite this, the UK airline industry has historically been divided on how to tackle APD with the full-service operators and low-cost carriers lined-up in different corners. Fortunately, recent moves by British Airways and Virgin Atlantic have brought easyJet and Ryanair together and into the wider industry campaigns. It is time the airlines rejoined the wider travel and tourism industry. At times we need to speak with a single voice on common issues. The wider industry needs the airlines, and the airlines can’t do it on their own.

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