At the conference I was at in Copenhagen on Friday a senior manager at SAS, the state owned Scandinavian airline, talked about its appeal to governments to prevent a race to the bottom in the aviation. He was quite open about which airlines he thought were leading that race, naming Ryanair, Norwegian and Finnair. What he said was you can now run an airline on an almost entirely outsourced basis.
You can outsource your planes.
And pilots.
And crew.
And ground staff.
And check in.
And of course you can contract out ticketing.
And maintenance.
And cleaning.
And catering.
And, inevitably, marketing.
Even accounting.
But there are two things that are left you have to do yourself.
One is own your brand - and you can guess where that's going to be located.
And the other is the only core function that is left that now identifies an airline for what it is - and that is its tax department.
Because for some airlines putting together outsourcing agencies at the lowest possible tax cost is the only real value added function they have.
And, as he did not say, but did not need to by that point, that is hard to describe as 'value added' to broader society.
Which is why he, and SAS, are right: the race to the bottom in aviation has to end.
Because, for a start, without tax there would be no aircraft to fly.
Or airports to fly to.
Or safety systems to ensure people will take the risk of flying.
Or people with enough income to afford to fly.
Or, come to that, international stability that has been the bedrock of the expansion of international travel.
But all of that is ignored by these airlines who think that is anyone else's business but there's.
Except it's not. Our duty is to make it our business.
And we could.
We could require that pilots and crew are employed by airlines, for example, or refuse them the right to land.
We could insist too that aircraft were owned in locations where there was accountability for that ownership - because that is key to the good governance that should be at the heart of safe travel.
And we could require that airlines be taxed on a unitary basis - i.e. from where they take off and land.
And that would just start the process.
It's all about political will.
But instead we have UK politicians giving away £100 million of tax a year to exempt children under 12 from airport duty to subsidise the foreign holidays of families already well off enough to pay for one when £145 million of benefits for children will be cut under the universal credit regime, which will take money away from those who can only dream of any holiday at all.
That's how absurd the politics of this airline issue are.
And we need to sort them out, now.
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Back in 1979 I was in Copenhagen for an EU thing. The air fare cost well over £300, more than the expenses allowed, so it was ship and then rail across Denmark. How much is that £300 worth now? But had a trip to Roskilde to see the newly dug up Viking ships. Of course Viking policy was to cover your travel expenses by looting. It seems that these days the Viking policy rules.
Return fare very much less than £300
Ferry from Harwich now ended
Says a lot really
Before the big bang there was nothing.
Then there was tax.
Without tax there would be nothing.QED
How about an example of a few major airlines that run on the wholly outsourced system?
And then justify why the UK should have the heaviest airport taxes in the world.
Anyway, the SAS gripe centres on Norwegian Air who they are battling for market share at the moment – and seemingly losing. The scenario you sketch doesn’t reflect reality and I wonder if you were chatting to Hans Christian Andersen.
I named three airlines
And this is not a UK initiative
Did you read what I wrote? It seems very unlikely
One of the airlines you mentioned is Ryanair. They don’t outsource their planes, so they fail at the first hurdle. In fact, isn’t their fleet key to their strategy? In the early days of their success they were known for using refurbished planes bought cheaply from other carriers (all the no-smoking signs were in German, I recall). Then, when the industry hit rocky times post 9/11 they bought a huge number of brand new-planes at great prices because they were a cash buyer whilst everyone else was leveraged to the hilt.
Does any airline operate in a manner even close to the one you hypothesise?
And even so, it’s ludicrous to suggest that tying all those outsourced services together would add no value. It’s like saying that the NHS doesn’t add any value because it doesn’t make anyone better, it just contracts with the people that do. Getting all the necessary contracts in place to enable services to be delivered is what companies do.
Do they own their planes?
The accounts don’t tell the truth on this issue, remember
Ever since Court Line we pretend ownership when there is no ownership
The lease model is a very old one
I genuinely do not know the answer in their case: I do know aircraft leasing is normal
If you look in their annual report, you can find out how many they own and how many they lease.
Of the 297 aircraft they operate, they own 246.
But that may not be true of others named
Again pretty easy to find…
Norwegian Air Shuttle: 45 owned, 45 leased
Finnair: 45 owned, 14 leased
Btw, I’m not sure why SAS are complaining about Finnair, given that Finnair is also government owned. Could it just be that SAS isn’t very well run and is being out-competed by other, better managed airlines? They certainly wouldn’t be the only current example of this at the moment. There are quite a few government owned and wholly private airlines out there doing very badly.
They’re complaining because the model they talk about is making it impossible to be viable because of tax competition
And I think safe, in their opinion
I also note you have ignored all other issues
You’ve named 3 airlines which you say are outcompeting SAS because they “outsource” everything, which you say is more tax efficient.
I note you present no real evidence for this.
You will also note that SAS themselves lease 91 of the 177 aircraft they operate or are on order. So as a proportion they lease more of their aircraft than the competitors they are complaining about.
I quoted SAS
And I thank you for your extremely pedantic comments but assure you I am utterly bored by your complete inability to grasp the issue being made
Well, if you didn’t make ludicrously uniformed rhetorical statements, backed up with no hard evidence – just dogma, then it would be easier to take you seriously.
I suppose you could run an airline on a completely outsourced basis. The fact is that very few airlines do. Sure, they might outsource some functions – where economies of scale make it worthwhile – but to suggest that these airlines are simply placeholder companies is pure nonsense.
As is the idea that without tax we wouldn’t have these airlines. Last I checked, enormous tax bills on fuel and airport/landing fees are the reason so many airlines are struggling.
For the last decade people have told me if only I agreed with them then I’d be taken seriously
Oddly enough, I am taken very seriously, precisely because that’s exactly what I have not done
And in the process the apologists for tax abuse have been exposed time after time after time
OK, I don’t really care how seriously you take yourself – which seems to be the meme on the internet. There are plenty of people who seem to think you are a running joke as well. I suppose this is par for the course for the internet.
What I do care abut is that you have written an article, which seems to be wholly based on rhetoric. You have clearly done no research on the subject, but are now pontificating as an expert yet the claims you make can be shown to be false.
Do you have any hard, real, factual evidence to show that these airlines are structured to avoid tax, are outsourcing the majority of their business or that tax itself is why airlines in general exist?
My guess is that you don’t, and will simply claim you are correct with another rhetorical outburst.
I made my source completely clear
What the hell else can I say?
I always do
That’s why, like it or not, people take me seriously
I happen to believe SAS
You don’t
Debate over
>>Because for some airlines putting together outsourcing agencies at the lowest possible tax cost is the only real value added function they have. –
Name one. The three you did name don’t use the model you and your SAS buddy deplore. In fact I doubt very much if any airline does. It’s all just a fantasy straw man, isn’t it?
Not according to SAS
And I believe them
They know something about this sector
R hand ir ‘ s model is based on low prices is it not?
So the beneficiaries of Tax competition are the customers. Tax incidence Richard?
Again Richard, hide your embarrassment, use the moderator.
The tax incidence argument you refer to is total nonsense
If it worked there would have been big pay rises in the UL over the last few years
There hasn’t been
But oddly capital shares have risen significantly as if the incidence was solely on capital
So stop peddling crap is the comment I have to make
Well if that’s your level of debate I’m off.
Which will save me using the delete button