Managing aviation passenger demand with a frequent flyer levy

This paper considers the feasibility of managing aviation passenger demand through a reformed taxation regime for flights. Specifically, it is supposed that Air Passenger Duty (APD) be repealed and replaced by a Frequent Flyer Levy (FFL), which would vary depending on the number of previous flights taken by an individual.

The research question is what such a tax regime should look like in order to achieve four goals: (i) prevent passenger demand from increasing more than 60% by 2050, as recommended by the Committee on Climate Change; (ii) be revenue neutral to the exchequer; (iii) obviate the need for new runway capacity; and (iv) reduce greenhouse gas emissions in line with a low probability of > 2°C warming.

The potential impact on businesses is also considered. It is found that a progressive tax on frequent flying could play a significant role in restraining demand for flights, while at the same time tending to distribute those flights more equally across the income spectrum.