Virgin Atlantic to absorb APD increase

The Grenada government says it welcomes the announcement by Virgin Atlantic that it will absorb an increase in the British government's Air Passenger Duty (APD) paid by passengers leaving the United Kingdom (UK) for the Caribbean.

"We are indeed pleased with this bold step on the part of Virgin. The airline and its president Sir Richard Branson have proven to be partners in the development of our region," said Richard Simon, press secretary to Prime Minister Tillman Thomas.

In a statement posted on the official government's website, Simon noted that previous statements on the APD by Sir Richard were "extremely useful" to the cause of the Caribbean and give significant support to the regional lobby to have the tax removed.

Virgin Atlantic chief executive officer Steve Ridgway, in a letter to British Chancellor George Osborne, said he was concerned about the impact of the APD on passengers and business.

"We have been placed in the invidious position of either being forced to go back and ask those passengers for more (money) or absorb the costs ourselves. We pride ourselves on defending and championing passenger interests, so we have taken the costly decision to shield our affected passengers from a tax surcharge," he said.

The move could mean hundreds of thousands of pounds on Virgin's bottom line.

"I do not underestimate the challenge you face in reducing the deficit, but given the importance you rightly place on international trade and inbound tourism in driving growth, increasing the cost of doing international business and visiting the UK is the last thing that should happen at this time," Ridgway wrote, adding that the "APD is not just a tax on air passengers; it is a tax on tourism and trade."

As of April 1, this year, the APD increases from £75 (US$117) to £81 (US$127) for economy class, and from £150 (US$235) to £162 (US$254) for business and higher classes.

Deputy chairman of the Caribbean Tourism Organisation (CTO) and Barbados' Tourism Minister Richard Sealy said the Caribbean would continue its campaign against the British tax that would add at least £80 (US$125) to the cost of a ticket to the region.

Simon said any increase in the tax would create further hardship for the "travel dependent" tourism industry, which is already reeling from the effects of the global economic downturn.

"The position of Virgin is consistent with our call for the UK to review the impact of the tax on one of the most important industries to Caribbean countries," he said. "Tourism is the largest contributor to some of our economies and we welcome the assistance of Sir Richard and Virgin Atlantic in bringing additional relief to our countries and attention to this issue," he added.

- CMC