Negative competitive effects of an air passenger excise duty

The Competition Authority is concerned that the introduction of an air passenger excise duty could lead to unintended effects on competition.

The Norwegian Government has introduced an air passenger excise duty of NOK 80 per passenger, beginning April 1 2016. The fee will be imposed on both domestic flights and international flights departing from Norway.

The Directorate of Norwegian Customs has submitted the proposed implementation of the air passenger excise duty for consultation, inviting interested parties to submit comments within February 21 2016.

The Norwegian Competition Authority (NCA) has issued a written response to the consultation. The NCA has expressed concerns that the introduction of air passenger excise duty could lead to unintended effects on competition.

– The introduction of a passenger excise duty can prevent competition neutrality between the airlines. This applies especially for transfer traffic. Passengers travelling with two different airlines without an interlining agreement will have to pay the air passenger excise duty twice, while those travelling with airlines that have an interlining agreement, only pay once, says Senior Advisor Elisabeth Steckmest.

Furthermore, the NCA points out that the suggested tax may affect airlines differently. For low-cost carriers, a relative sharp rise in price could result in a greater reduction in passengers than for network carriers. Ultimately, the introduction of an air passenger excise duty could lead to fewer airlines in the Norwegian aviation market.

In the view of the NCA, the competition implications of the proposal need to be evaluated before the tax is introduced.

Elisabeth Steckmest.
Senior Advisor Elisabeth Steckmest