Will Schiphol be the first airport to tax transit passengers?

The introduction of a new tax for passengers who transit via Amsterdam Schiphol Airport will have serious consequences for the network of KLM and the connectivity of The Netherlands as a whole. KLM CEO Marjan Rintel has issued this warning after a majority of the Dutch parliament voted in favor of the new tax that also applies to owners of private jets. “We are the first and only country in the world where this kind of tax has been proposed. This would mean that only passengers who travel via Schiphol will have to pay extra on top of their air ticket, while others flying via other European airports are exempted from this duty,” Marjan Rintel says in a statement on LinkedIn. Late on Thursday, Dutch Parliament or Tweede Kamer voted on the tax proposal after two days of discussing the 2024 national budget, which was presented on Tuesday. With overall concerns about the costs of living for lower incomes and rising costs due to inflation, political parties proposed countless motions and amendments for next year’s budget for an aggregate €4.0 billion. One of them came from the central-right Christian-Democratic CDA party, which called on the government to prepare legislation as quickly as possible for a tax for transit passengers and private jet operators. Proceeds should be used to reduce the energy bill next year. The motion got the support of three other parties and eventually was passed with a majority of 93 against 57 votes out of 150. Capacity reduction A transit tax has been suggested before as a means to levy taxes and reduce demand at Schiphol, which has been the subject of a longer political debate to reduce capacity. As reported by AirInsight, the Dutch government proposed in June 2022 to cap capacity to 460.000 movements this November and to 440.000 in November 2024. Airlines and stakeholders initially won in court, but an Appeal Court ruled in favor of the government a few months later. More recently, the caretaker government announced that it will reduce capacity to 452.500 movements from November 2024, pending the outcome of a Balanced Approach procedure with the European Commission. A transit tax means another impact on Schiphol. It could result in a reduction of transit passengers of between 12 and 34 percent, dependent on if either a low or high tax scheme is introduced, a study from independent agency CE Delft showed in May. Between four and eight million passengers could opt to transfer via another airport in London or Paris, mostly passengers who use Amsterdam to connect to another intercontinental flight. As a tax will reduce demand and hence aircraft movements, this will have a positive effect on carbon dioxide and other emissions around Schiphol, says CE Delft. Hub-and-spoke model Currently, six out of ten passengers flying via Schiphol are transit passengers. Transit has been a core element of the airport’s strategy and that of its main customer KLM, which has built a hub-and-spoke network around this concept since the 1970s. The airline connects over 170 destinations in and outside Europe and over 700 together with (SkyTeam) partners. Without the hub-and-spoke model, the airline would be able to offer fewer than ten intercontinental flights. Before the Covid crisis in 2019, 25.8 out of 71.7 million passengers used Amsterdam Schiphol to connect to another flight. This model is already under pressure from new hubs like Dubai, Doha, and Istanbul, but also closer to home as London Heathrow and Paris Charles de Gaulle are building their networks. Six out of ten passengers who use Amsterdam Schiphol are transit passengers. (Richard Schuurman) In her statement, Marjan Rintel refers to comments from the government, which warned in July of the effects that a transit tax would have on connectivity and the Dutch economy. Now, she warns that certain destinations out of Schiphol will be dropped if the tax is implemented. “Parliament unjustifiably thinks that this proposal will be beneficial while the contrary is true,” Rintel adds that passengers flying out of Amsterdam will already be confronted with 80 to 100 in additional costs as a CO2 tax and other European climate taxes will go up. While other parties warned of the potential effects of the tax on Schiphol and KLM, including the transfer of flights from Amsterdam to Paris Charles de Gaulle, CDA leader Henri Bontenbal said that he is aware of them. He added that while The Netherlands might be the first country with a transit tax, the government should push for a European-wide tax at EU level. Pilot union VNV is most concerned Dutch pilot union VNV, which has a strong position within KLM, said on X that it is “most concerned that parliament has voted in favor of a motion that intends to axe the network out of The Netherlands and could impact one of its biggest employers, KLM. Previous studies have learned that a national tax on transit passengers will hit connectivity really hard and have an impact on the investment climate. It isn’t surprising that major corporates are fleeing the country because of this pastor policy.” It isn’t known when the new tax will be introduced. Although it is part of the 2024 budget proposals, the current government will have to launch legislation procedures. Given its current caretaker status after its resignation on July 7 and with general elections coming up on November 22, the government might pass the tax on to the new one. Negotiations could take months to complete. KLM CEO Rintel says that her airline will launch a lobby with political parties during the forthcoming election campaign to get the plan off the table again. KLM should brace itself for a rough ride, as most parties are positioning themselves as anti-growth and pro-taxation of air travel and air fuels. The liberal-democratic party D66 just today released its election program, proposing an identical transit tax plus a variation of air taxes for short-haul, medium-haul, and long-haul. KLM will also lobby the Senate, which will have the final say when the transit tax is presented as a new law.

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