ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN:
The Treasury will announce on Tuesday that the Air Passenger Duty Tax will rise despite calls from chief executives of the UKs and the world’s biggest airlines to scrap it. Willie Walsh, the Chief Executive of the airline group that includes BA and Iberia, says it deters tourism during a time of course when the industry is capable of giving a boost to the UK economy and Mr Walsh is here with me, a very good morning to you Willie Walsh. You are saying that the government has no policy for aviation, that they are basically fumbling around here but of course environmentalists will say it is important that the airline industry pays its taxes towards CO2 emissions.

WILLIE WALSH:
I agree, the airline industry has to play its part in addressing its environmental performance and I believe we are, in fact I believe unlike lots of other industries, we actually have a plan in place as an industry to take us through to 2050, to demonstrate how we can significantly improve our environmental performance so we’re not without action. In fact we have got a very credible plan in place and we are determined to demonstrate not only can it be credible but that we will beat it as well.

DERMOT MURNAGHAN:
So why is this doubling of Air Passenger Duty damaging in your book to the British economy?

WILLIE WALSH:
Well the first thing to remember is it is not a green tax and the government has made this clear, this is a simple tax, revenue generating tax so it is nothing to do with the environment, not a penny of the tax goes to environmental issues. Why I believe this is damaging is because it is making the UK uncompetitive, it is making it expensive to do business here, it is deterring tourists from travelling to the UK, it is deterring business people from coming to the UK and that’s the message that I get when I travel around the world, when I go to India and China, two of the big economies that we want to attract into the UK, they’re telling me that the UK is becoming too expensive and they highlight this tax as one of the reasons why they believe they can do business better elsewhere.

DERMOT MURNAGHAN:
Can you paint a picture of if it was scrapped altogether, what that would do again in your analysis to the UK economy in terms of employment and other things?

WILLIE WALSH:
Well I think there are two things I would point you to. The first is that since 2007 when the then Chancellor, Gordon Brown, doubled APD, we’ve seen 29 million fewer people travel from UK airports. Well a lot of people will say well they’re tourists, er UK based people travelling abroad on holidays but that’s not the fact. If you just take the five most important airports in the UK, of that 29 million passengers, nine million of them were people who were travelling for the purpose of doing business and over three million, 3.3 million of those were foreign based business people who stopped coming to the UK. So there has been a real fall in the number of people travelling to the UK for business purposes. The second thing I would point you to is what happened in the Netherlands, one of the countries that the Chancellor has identified as having overtaken the UK in terms of its economic position. In the Netherlands they introduced a travel tax in July of 2008 and when they assessed it a year later, they discovered that it had raised less than they had expected but more importantly, having raised €312 million, it actually impacted on their economy to the tune of €1.2 billion.

DERMOT MURNAGHAN:
And you suspect that that kind of thing is happening to our economy?

WILLIE WALSH:
Absolutely and that’s why I’ve said to the Chancellor, why not undertake an independent study into this.

DERMOT MURNAGHAN:
But the Chancellor and the Treasury treat you favourably when it comes to tax, VAT on fuel, you get away with it altogether.

WILLIE WALSH:
But it’s not the Chancellor or the Treasury doing that, there are international agreements in place and I would have no difficulty if internationally people tried to do this, the problem is this is done to the UK and the UK in isolation. So if you look at Europe, there are three other countries in Europe that have an aviation tax, the UK is double what it would be in Germany and it is about twenty times the rate of France. The example we give is a family of four travelling from Australia or to Australia, would pay £340, that would be £160 if you were in Germany, it would be £15 if you were in France and in 22 other European countries there is none.

DERMOT MURNAGHAN:
Okay, we can see the differentials there, you have also got issues in this no policy for aviation accusation to the government about capacity, airport capacity in the south east. You wanted to see that third runway at Heathrow, that’s not going to happen, what about a brand new airport somewhere out in the Thames Estuary?

WILLIE WALSH:
Well I accept that the third runway will not be built, I campaigned for it, I thought it was the right thing to do in the interests of the economy, I accept now that that will not happen. The problems I see with regards to a completely new airport is a financial problem. Technically I believe it can be done, there are technical challenges to doing it but financially I just don’t see how it is going to be funded. It would cost at a minimum I reckon about £50 billion, probably closer to £60 billion and what people sometimes don’t understand is that all airport development in the UK is funded by the airlines and the airports, it is not funded by the taxpayer so to build this new airport you are going to have to get some private investment and to find somebody in the current environment to put up £50-60 billion I think is just not a credible proposition.

DERMOT MURNAGHAN:
Well Boris Johnson, the Mayor of London, thinks it could be done but without that happening, and of course the lead times on this are huge and meanwhile I know you have been saying, well business will move to Paris and Amsterdam and Frankfurt and other places as well. What can we do in the interim?

WILLIE WALSH:
We are falling down the world league. Heathrow is the number one international airport in the world, it has been for many, many years. We don’t have very many number ones in the world. The reality is that Dubai, which ten years ago was 99 in the world, will overtake Heathrow within the next two or three years, so you’ve got Dubai, a state that recognises the value of aviation, that recognises the economic growth that can be achieved by having a credible, coherent aviation policy, has gone from 99 in the world to number one in 2014 or 2015.

DERMOT MURNAGHAN:
Last thing Mr Walsh, can I ask you about industrial relations? Of course well documented problems within your own company, hopefully you feel that they can be avoided for the future, have you got any advice for the government – we’ve been talking about a government aviation policy, have you got any advice for the government in terms of its industrial relations so to speak with its public sector workers?

WILLIE WALSH:
I’m always shy to give advice but the one bit of advice I would give is you’ve got to be determined in situations like this. You’ve got to be clear in terms of what your goals are and you’ve got to be focused and determined to achieve those goals. The biggest mistake that companies make when they embark on these sorts of changes is that halfway through it they lose sight of the goals, they forget what they were actually trying to achieve and the objective becomes to settle the industrial relations rather than to achieve the objective that was set out in the first place. So be determined, be clear, be focused and see it through to the very end.

DERMOT MURNAGHAN:
Do you feel that your industrial relations problems are closed?

WILLIE WALSH:
I believe so. I think we’ve done a great job, I think there are fantastic people in British Airways, we’ve reached agreement with all of our trade union groups, these are in the main long term agreements and I’m optimistic that these are issues that are behind us.

DERMOT MURNAGHAN:
Last question, you’re trying to buy British Midland, BMI, if you do, a question for Belfast, will you keep that route open?

WILLIE WALSH:
Well we’re at a state where we are completing due diligence, there is a long way to go on this and it’s too early to say what we would or wouldn’t do. We don’t have exclusive negotiations with Lufthansa who are selling the airline so there are other groups interested in doing that but I believe that the British Airways IAG proposal is the most credible one and the only one that’s likely to retain those links to Heathrow.

DERMOT MURNAGHAN:
Okay, Mr Walsh, thank you very much indeed, William Walsh there, Chief Executive of IAG.