Potential effects of tighter fiscal regime applied to Air Passenger Transport: the case for the European low-cost airlines

The air sector has been historically subsidized by national Governments, which have adopted protectionist policies for many years, producing anomalous situations that persevere today.

Banister (2005) indicates that, at the present, Civil Aviation has a privileged position in terms of taxation. In fact, under an interpretation of Article 24 of the 1944 Chicago Convention, there is no tax or VAT on international fuel and only VAT on national fuel, whilst excise duties on kerosene for international flight that are zero.rated. Additionally, there are "Duty-free" shopping facilities at all airports, whereas no VAT is levied neither on tickets nor on aircraft purchase and maintenance and neither on meals or baggage handling.

Whitelegg and Cambridge (2004, p.8) argue that "in the UK, aviation receives annually a subsidy of £9 billion, and globally it benefits from no taxation on fuel, spin-off R&D from military developments and generous assistance with new airports and surface transport infrastructure".

In contrast with the principles of sustainable development, the polluter pays principle is not applied, whilst reducing growth rates and reducing absolute levels of flying have been excluded from policy debate (Whitelegg and Cambridge, ibid).