Around a third of Edinburgh to London rail journeys could be lost to air travel if air passenger duty (APD) is abolished, according to Virgin Trains.
The firm said the move could also have a detrimental effect on efforts to bring high-speed rail north of the Border. The Scottish Government wants to cut the tax by 50 per cent.
The reduction will begin when a Scottish replacement to APD is introduced in April 2018, and will be delivered in full by the end of this Parliament.
Ministers hope reducing the levy, and eventually abolishing it, will increase the number of direct flights to and from Scotland.
Virgin Trains is among several transport operators who gave evidence on the Air Departure Tax (Scotland) Bill – which will replace APD – at Holyrood’s Finance Committee yesterday.
The firm operates on the East Coast and West Coast inter-city rail routes between Scotland and London.
In a written submission, it said the abolition or reduction of the tax could have a “significant impact on rail passenger numbers which have grown significantly over the last 20 years, particularly between Scotland’s central belt and London”.
It added: “Virgin Trains’ own initial modelling suggests that as much as a third of the southbound Edinburgh-London rail market could be lost to air if APD were abolished on this route and the tax reduction was passed on in reduced fares. This would represent a negative modal shift, lead to a significant increase in carbon emissions, reduce funds available to Government through franchise payments and undermine the long-term growth of the cross-border rail market and business case for developing a high-speed rail network to Scotland.”
Virgin Trains said a policy is required which distinguishes between domestic travel – where flights and rail are both options – and international routes. It said the Government “can avoid inadvertently harming the domestic rail sector once the ADT is levied by differentiating between journeys made domestically and those made internationally, such as applying a cut to ADT to only Band B journeys (over 2000 miles), for example”.
It added: “A reduction on APD in this band could thus target long haul flights without having a negative impact on the Glasgow/Edinburgh to London corridors.”
Airlines and airports have been supportive of the principle of cutting APD. Research published by Edinburgh Airport, found a 50 per cent cut to APD in one move in April 2016 would have meant an additional 18 million passengers using Scotland’s airports by 2021.
“This will create nearly 10,000 new jobs in Scotland, add more than £300 million Gross Value Added per year to the Scottish economy, and generate a range of tax revenues that will comfortably exceed the cost of the cut,” it said.