'Delivering Scotland's Air Departure Tax': consultation analysis report

3. Analysis Part A – Proposed Highlands and Islands Exemption

Part A of the consultation document focused on the proposed Highlands and Islands exemption. These sections introduced and set out the following:

• Considerations of scope
• Potential impacts of the H&I exemption
• Potential administrative and operational challenges

Question A1: Do you agree that the carriage of passengers from airports in the Highlands and Islands to airports in Scotland and the rest of the UK should be exempt from ADT?

Of those who answered this question quantitatively (47 respondents), the breakdown of views was as follows:

Response	Total	Percentage
Strongly Agree	31	66%
Mostly Agree	9	19%
Mostly Disagree	3	6%
Strongly Disagree	4	9%

A full breakdown by respondent type is provided in the table below:

Respondent Type	Strongly Agree	Mostly Agree	Mostly Disagree	Strongly Disagree
Airlines	5	0	0	0
Airports	1	1	1	0
Travel/Tourism	4	1	0	0
eNGO	0	3	0	1
Public Body	6	0	0	0
Individual	12	4	2	3
Other Organisations	3	0	0	0
Total:	31	9	3	4

All Highlands and Islands organisations and individuals who responded (13) answered ‘strongly agree’.

Analysis of Question A1 will not cover in detail responses that discussed the potential impacts of removing the Highlands and Islands exemption for flights to airports in Scotland and the rest of the UK. These responses are out of scope of the question.

Detailed analysis will also not be set out for the five responses (all eNGOs and one individual) that explained or caveated their answer with the condition that private jets should not qualify for the Highlands and Islands exemption. Responses related to the exclusion of private jets from the exemption are set out in the analysis of Question A6.

Connectivity in sparsely populated and rural locations

Many respondents who selected ‘strongly’ or ‘mostly’ agree, framed their response around the unique challenges faced by the Highlands and Islands region that justify the need for the proposed exemption to support intra-Scottish and domestic connectivity.

Responses highlighted the difficulty in providing adequate connectivity due to the geography of the regions and limited feasible transportation alternatives. Respondents noted that taking non-aviation methods of transport, including ferries and cars, can lead to “travel journey times in excess of three hours” (The Comhairle) that can “necessitate additional days and nights away from home/base to complete essential journeys” (HI Regional Partnership). Another respondent stated that a surface journey from Inverness to London can take over eight hours. Multiple respondents also noted that these challenges are particularly acute for island residents who often rely on multiple modes of transport during the same journey.

Several respondents also raised the low population density across the Highland and Islands region. The HI Regional Partnership noted that areas served by the island and rural mainland airports of Highlands and Islands Airports Limited (HIAL) have a significantly lower population density. They also stated that the Outer Hebrides, Orkney and Shetland have population densities of 9, 16 and 22 people per square kilometre respectively, compared to Scotland’s average of 71 per square kilometre (as of 2024).

Respondents expressed that for those needing to travel for business, education and medical care reasons, or travellers who are elderly and/or disabled, long surface-travel times are not feasible alternatives to flying and the proposed Highlands and Islands exemption protects connectivity in the region.

“The exemption is a proportionate and necessary response.” - Loganair

Importance of Aviation Services

Many respondents who cited geography, distance and sparse population as reasons to support the proposed exemption also emphasised the role of the exemption in protecting flights to and from the Highlands and Islands. Responses noted that these flights provide part of the solution to the challenges presented by the geography of the Highlands and Islands.

Responses emphasised the important role that these flights provide by enabling access to reliable transportation for urgent and/or necessary journeys. Examples of reasons for these types of journeys included: access to medical care, legal and financial services, education, commuting to employment and time-sensitive business needs.

“The permanent remoteness and sparse population of the Highlands and Islands create structural disadvantages that are not experienced elsewhere in Scotland ... Exempting passengers departing from Highlands and Islands airports on domestic routes is a proportionate and well-established response to these disadvantages and reflects long-standing recognition of territorial equity.” - Individual

Route Viability

Multiple respondents who strongly or mostly agreed with Question A1 expressed the view that ticket prices are already considered overly expensive. Respondents cited multiple factors for higher ticket costs, including limited competition due to flights to and from the Highlands and Islands relying largely on one regional carrier, cumulative tax burden and regulatory costs. The HI Regional Partnership also noted that high costs for business travel are “more of a barrier than even punctuality and frequency [of flights].”

“I live on an island and travel costs are already very high – the cost of travel could become prohibitive for many who need to use it for education and employment as well as those who use it for leisure activities.” - Individual response

Multiple respondents also highlighted thin profit margins for carriers that run services in the Highlands and Islands. Loganair noted that even small tax increases, such as the £8 charged under Air Passenger Duty (APD) in 2026/27 for the carriage of a passenger on a domestic flight, could lead to negative profit margins if absorbed by carriers. Other respondents highlighted the low passenger loads and limited frequency of the thinnest Highlands and Islands commercial routes.

As such, multiple respondents agreed that the proposed Highlands and Islands exemption will help ensure the continued support of marginal commercial routes that provide crucial connectivity links.

Impact on Highlands and Islands economy

Many responses that agreed (either strongly or mostly) emphasised the importance of the proposed Highlands and Islands exemption in protecting and/or supporting the economy of the region and the Scottish economy more broadly, particularly in relation to the tourism industry.

Several respondents raised the point that businesses operating in the Highlands and Islands experience unique challenges due to the geography and sparse population of the region. These include a limited local labour market, relatively low wages alongside a higher cost of living, additional costs for the transport and provision of goods and fewer opportunities to engage with other businesses, at both local and international levels.

Multiple respondents stated that the exemption supports economic growth in the region by supporting the connectivity that enables Highlands and Islands businesses to participate in regional, Scottish and international markets. Another two respondents noted that the proposed exemption will encourage investment into the region.

“The air service networks effectively shrink distances allowing day trips and urgent trips to be made closing some of the disadvantages of doing business from the region.” - HI Regional Partnership

“For many businesses, air connectivity is not a convenience but a lifeline, supporting access to markets, investment, skills and supply chains.” - North Highland Chamber of Commerce

Many respondents also highlighted the positive impact of the proposed exemption in attracting tourists and supporting the regional tourism sector. Respondents emphasised that many small hospitality and tourism businesses’ rely on aviation connectivity bringing tourists into the regions.

“[The proposed exemption will] help to protect the livelihoods of the many small tourism and hospitality businesses that are reliant on attracting visitors to the H&Is all-year-round and in harder to reach, remote destinations, including Shetland and Orkney.” - Scottish Tourism Alliance

Market Distortion and the Inclusion of Inverness Airport

The most common reason for disagreement with the proposed Highlands and Islands exemption was that it may cause market distortion and impact competition between Scottish airports. One respondent wrote that the exemption should only apply to flights from Highlands and Islands airports to Scottish airports to give “other airports a fair and even playing field” (individual ).

Multiple respondents raised that Inverness Airport should not be included in the proposed exemption. Two respondents suggested that Inverness airport is not acutely affected by the geography of the Highlands and Islands regions and has well-developed connectivity as train and coach services to Scotland’s Central Belt are available.

Respondents were concerned that including Inverness Airport in the exemption could lead to an unfair tax advantage for Inverness Airport that may affect passenger choices and airlines’ decisions on where to establish routes. Respondents emphasised that a more targeted Highlands and Islands exemption would support connectivity for the Islands and more sparsely populated parts of the Highlands while ensuring airlines’ decisions are guided by customer demand instead of tax incentives.

Other

Singular responses suggested possible modifications to the proposed Highlands and Islands exemption. These included a heavy discount on ADT based on the degree of alternative surface transportation available for the route. A respondent suggested that residency be made an eligibility requirement for the exemption. Another respondent suggested that Aberdeen airport should be included within the Highlands and Islands exemption due to its peripheral location. As these points were raised by singular responses, they are not considered in further detail here.

Scottish Government Response

The Scottish Government considers that there is a need for a continued tax exemption for the carriage of passengers on flights from Highlands and Islands airports where the final destination is a Scottish airport or an airport in the rest of the UK in order to protect aviation connectivity in the region. As Scotland transitions from APD to ADT, a continued tax exemption is necessitated by the continued importance of air transport to the daily life of a region that suffers from disadvantages arising from its well-evidenced geographic and population density differences to the rest of the country.

The Scottish Government acknowledges the concerns raised by some respondents that Inverness airport is closer to central Scotland than other Highlands and Islands airports. However, Inverness Airport is the largest airport in the Highlands and Islands region, serving as the regional hub for Highlands and Islands passengers. Respondents have highlighted that the catchment area of Inverness airport serves a region where drive times to access Inverness airport can exceed 2-3 hours (with public transport options often requiring significantly longer), which is longer than drive times to other Scottish airports outside of the Highlands and Islands. Air transportation is the only available means of transporting passengers or goods to and from the rest of the UK in a single day. Ensuring the continued affordability and provision of Highlands and Islands aviation services to and from the rest of the UK is central to Highlands and Islands trade opportunities. A connection by rail from Inverness to London requires a journey time of almost eight hours. In contrast, a flight to London from Inverness takes approximately 90 minutes and allows return travel on the same day.

It is therefore the position of the Scottish Government that there is a need for a continued tax exemption for the carriage of passengers on flights from airports in the Highlands and Islands (including Inverness Airport) to airports in Scotland and the rest of the UK in order to support the provision of such aviation services where alternative transport modes do not yet provide the ability to do a day’s business and return within the same day.

While the Scottish Government seeks to ensure that all subsidies, including tax exemptions, are proportionate to their specific policy objective and limited to what is necessary to achieve it, it would not be appropriate to attach a residency requirement to the revised Highlands and Islands exemption. This is because a residency requirement would be disproportionately resource-intensive to administer for both the taxpayer and the tax authority.

Question A2: Do you agree that the carriage of passengers to airports in the Highlands and Islands from all Scottish airports should be exempt from ADT?

Of those who answered this question quantitatively (47 respondents), the breakdown of views was as follows:

Response	Total	Percentage
Strongly Agree	34	72%
Mostly Agree	9	19%
Mostly Disagree	1	2%
Strongly Disagree	3	6%

A full breakdown by respondent type is provided in the table below:

Respondent Type	Strongly Agree	Mostly Agree	Mostly Disagree	Strongly Disagree
Airlines	5	0	0	0
Airports	2	1	0	0
Travel/Tourism	4	0	0	0
eNGO	0	4	0	1
Public Body	5	0	0	0
Individual	15	4	1	2
Other Organisations	3	0	0	0
Total:	34	9	1	3

11 Highlands and Islands organisations and individuals who responded answered ‘strongly agree’.

Two Highlands and Islands organisations responded answered ‘mostly agree’. One respondent (Young Islanders Network) suggested that the exemption should be limited to Highlands and Islands residents only.

Analysis Notes

Detailed analysis will not be set out for the five responses (four eNGOs and one individual) that explained or caveated their answer with the condition that private jets should not qualify for the Highlands and Islands exemption. Responses related to the exclusion of private jets from the exemption are set out in the analysis of Question A6.

Responses that discuss the Air Discount Scheme are also not set out in detail, as the Scheme is out of scope of this consultation.

In addition, responses that referred to Question A1 with no additional comments are not set out in detail.

Connectivity Support

The majority of respondents who agreed with the introduction of an ADT exemption to Highlands and Islands airports from Scottish airports cited a similar argument to those who agreed with Question A1: that the exemption supports important connections to rural and dispersed communities. Respondents suggested that the removal of aviation tax on these flights would help ensure equitable access by lowering air fares and supporting the viability of these routes.

“Maintaining transport connections for remote communities is crucial to supporting those communities. Air travel is the only option to much of the highlands and Islands communities and seat pricing is extremely price sensitive.” - Air Charter Association

Respondents noted that flights to the Highlands and Islands are often the return leg of important flights for residents of the region (e.g. for medical care). As outward flights from the Highlands and Islands are already tax exempt under APD (and as proposed under ADT) with a view to supporting connectivity, respondents considered that exempting the return leg follows the same logic of protecting connectivity.

Similarly, multiple respondents emphasised that exempting the return-leg is in line with other Scottish Government and UK Government policies that were introduced to protect Highlands and Islands connectivity. Examples of these policies included the recently announced exemption from UK ETS for ferry services to Scottish islands, the Air Discount Scheme (ADS) and the legal duty set out in the Islands (Scotland) Act 2018 to consider whether the development, delivery or redevelopment of any policy, strategy or service is likely to have a significantly different effect on an island community compared with the effect on other communities.

“The double exemption for intra-Scotland involving Highland airports is particularly welcome. It recognises the essential role of the internal air network and the extent to which Highland airports serve as genuine transport hubs for dispersed communities across a vast geography.” - Individual

Commercial Connectivity

Many respondents referred to or reiterated their responses to Question A1 regarding the few feasible alternative transport options instead of flying for communities in the Highlands and Islands. The limited connectivity in the region is further heightened by high ticket prices, with the HI Regional Partnership citing research previously commissioned by HITRANS which found that the costs of flight tickets were the main barrier to use of internal air services in Scotland across all passenger types. These arguments are set out in more detail in the analysis of Question A1.

Population Retention

Respondents emphasised that the expanded scope of the exemption could contribute to lower fare levels, therefore supporting intra-Scotland connectivity. Multiple respondents commented that the expanded exemption may encourage the retention of people and businesses in the Highlands and Islands region. One respondent noted that increased connectivity to the Highlands and Islands helps support population levels and may encourage young people to live and work in the region.

“I think that the cost of travel to the Highlands and Islands is a factor in depopulation and the lack of attractiveness to young people.” - Individual

Commercial Route Sustainability and Development

Multiple respondents noted that the proposed expansion of the exemption supports current route viability, which is particularly important in the Highlands and Islands region due to thin margins for many routes. If the expanded exemption were to support lower fares, it was suggested that this could in turn stimulate demand and help to sustain those routes.

Some respondents also suggested that the exemption may enable new routes to be established in the Highlands and Islands region that would otherwise be unviable. However, fewer respondents agreed with this, indicating that the exemption would be more likely to sustain current routes than incentivise the establishment of new routes.

“Widening the exemption to now include inbound legs to the Highlands and Islands will stimulate demand for air travel through lower fares. In turn this can support both new routes and improved frequencies/timings on existing ones, offering benefits to all those travelling / looking to travel.” - HI Regional Partnership

Economic and Social Impacts

Many respondents emphasised the positive economic and social effects that could result from increased connectivity to the Highlands and Islands from Scottish airports. These positive effects include increased connectivity for businesses, labour and tourists who can travel more affordably and easily between destinations. These considerations have been set out in more detail in the analysis of Question A1.

“The creation of this extension will mean that any visitors to the Highlands and Islands can travel more creatively around a number of differing destinations within Scotland, increasing the level of spend in the leisure and hospitality sector as well as retail spend on high end products produced in Scotland, generating additional revenue to the economy.” - Scottish Passenger Agents’ Association

Market Distortion

As outlined in the analysis of Question A1, two respondents highlighted concerns regarding possible market distortions favouring Inverness airport.

“Avoiding distortion of the wider market is critical as airline choices should always be made on demand-based reasons rather than taxation. For example, if airports are competing for limited aircraft capacity then taxation discrepancies may decide placement.” - Edinburgh Airport

However, one individual noted that the exemption of Scottish flights to Highlands and Islands airports does not incentivise long-haul or hub-based journeys and so does not create international market distortions.

Emissions

While one respondent (Safe Landing) notes that “from an environmental perspective, these flights represent a relatively small percentage of carbon emissions from UK aviation”, multiple other respondents expressed concern regarding the environmental impact of the proposed exemption.

These respondents take the view that the aviation industry should pay for the high level of emissions they produce in line with the ‘polluter pays’ principle. This argument is set out in more detail in Part B and Question C2 of this consultation analysis.

“Given the imperative of reducing Scotland’s emissions, we are currently unconvinced that this substantive change is justified. While there may be an equity case for exempting incoming and outgoing flights from airports in the Highlands and Islands for the region’s residents, we feel the case for this applying to non-residents of the Highlands and Islands is insufficiently explained.” - Oxfam Scotland

Other

Several respondents suggested further widening the exemption to include flights to Highlands and Islands airports departing from airports in the rest of the UK.

Scottish Government Response

The Scottish Government considers that extending the Highlands and Islands exemption to the carriage of passengers on flights to airports in the region from all Scottish airports would strengthen the objective of promoting and protecting connectivity in the region. This goes beyond the current APD exemption and exempts both legs of intra-Scotland flights to and from airports in the region.

The Scottish Government recognises the need for careful consideration against the Subsidy Control principles to ensure that the exemption is compliant. Assisting travel and connectivity in more sparsely populated regions is accepted as a legitimate equity rationale for the purposes of Subsidy Control. The proposed Highlands and Islands exemption is designed to serve this purpose and is consistent with wider Scottish Government policy and objectives in this area.

The Scottish Government acknowledges respondents’ suggestion of widening the exemption to include flights from airports in the rest of the UK to Highlands and Islands airports. However, ADT only applies to the carriage of passengers on flights that begins at an airport in Scotland. The tax treatment of flights departing from airports in the rest of the UK to airports in the Highlands and Islands region (e.g. Bristol to Inverness) is a matter for the UK Government.

Question A3: Do you agree that direct and connecting international flights from airports in the Highlands and Islands should not be exempt from ADT?

Publication error

On 10 February, a consultation response pointed out that Question A2 was duplicated and therefore Question A3 was not included in the submission form. The form was briefly removed from the consultation platform before being reuploaded the same day with the correct form.

Nine individuals (including the one that pointed out the error) had submitted responses prior to the correct form being republished. For those who had given consent to be contacted by the Scottish Government regarding this consultation, an email was issued requesting respondents fill out Question A3 on the new form. One individual responded, while the individual who noticed the error had correctly answered Question A3 in their initial response. The seven incorrect responses have been excluded from the analysis of this question.

The Scottish Government apologises for the error and welcomes any further views on Question A3 sent to AirDepartureTax@gov.scot.

Of those who answered this question quantitatively (40 respondents), the breakdown of views was as follows:

Response	Total	Percentage
Strongly Agree	11	28%
Mostly Agree	6	15%
Mostly Disagree	4	10%
Strongly Disagree	19	48%

A full breakdown by respondent type is provided in the table below:

Respondent Type	Strongly Agree	Mostly Agree	Mostly Disagree	Strongly Disagree
Airlines	0	0	1	5
Airports	2	0	0	1
Travel/Tourism	0	0	2	2
eNGO	4	0	0	0
Public Body	1	1	0	3
Individual	3	4	1	6
Other Organisations	1	1	0	2
Total:	11	6	4	19

Impact on Connectivity and Route Development

Several respondents were concerned with the exclusion of international routes from the equity rationale that the Scottish Government is using for retaining the Highlands and Islands exemption for domestic routes. These respondents wrote that international routes often qualify as crucial connectivity links and retaining the full exemption would support communities in the region to access necessary aviation services.

Several respondents also suggested that removing international connectivity from the exemption will jeopardise route sustainability and development. This was on the basis that higher rates of tax may disincentivise carriers from establishing new routes in the Highlands and Islands and the increased costs may see current routes discontinued.

“This is a change to the current UK govt exemption and will mean that air fares on international routes from the highlands will increase. This will lead to a drop in demand and potentially a reduction in routes.” - Inverness Chamber of Commerce

International Flights as Connectivity

Respondents who disagreed with the removal of the exemption for international flights emphasise that these flights are important as connectivity flights. Two respondents explained that businesses in the Highlands and Islands rely on international flights to undertake essential business operations and that making these flights liable to ADT could limit business opportunities.

“Direct and connecting flights to international destinations should benefit from the ADT exemption since so much island business involves the export of high value produce to international markets (aquaculture, food and drink, textiles, pharmaceuticals and so on) and this trade necessitates personal travel to engage with overseas customers – more competitive air fares will lessen the inequality faced by island-based businesses.” - Comhairle nan Eilean Siar

Impact on Economy

The majority of respondents that disagreed with the proposal cited the potential negative economic impact on the Highlands and Islands and Scotland from the risk of reduced international connectivity.

Many respondents emphasised the potential detrimental impact that removing the exemption for international flights may have on Highlands and Islands businesses. Respondents expressed the view that these businesses must retain access to international markets, investors and goods in order to remain competitive. It was noted that international connectivity for the region is already limited, and removing the exemption could compound the geographical challenges that businesses already face.

Respondents also suggested that the removal of the international exemption would see a negative impact on international tourism. Respondents explained that international connectivity to the Highlands and Islands provides significant revenue to local hospitality and supports jobs across the region. Respondents were concerned that the sustainability of the tourism sector would be jeopardised without the exemption.

“The tourism sector, which employs 239,000 people in Scotland, relies on the four and a half million international visitors that travel to Scotland each year, with the vast majority travelling by air. Aviation thus supports jobs right across Scotland, from the Highlands and the islands to international destination cities like Edinburgh and Glasgow.” - Airports UK

Some respondents also noted the social benefits of retaining the exemption for Highlands and Islands residents who wish to holiday abroad.

Inverness Airport

Multiple respondents also pointed out that Inverness Airport remains geographically disadvantaged compared to other mainland Scottish airports and the exemption helps support the airport. Respondents cited the lower passenger numbers, low frequency of domestic routes and minimal international routes recorded at Inverness Airport relative to Aberdeen, Edinburgh and Glasgow Airports. It was also noted that Inverness faces demand leakage due to other Scottish airports’ larger international route network, as Highlands and Islands residents travel to alternative airports to access those routes.

“Applying the same tax treatment to [Inverness Airport and Edinburgh Airport] does not create parity. It entrenches and deepens the existing inequality. Parity of outcome in connectivity terms requires differentiated treatment that accounts for the structural disadvantages Highland airports face.” - Individual

KLM Inverness – Amsterdam Flight

A significant concern raised by multiple respondents was the continued viability of the KLM route from Inverness to Amsterdam. Respondents highlighted the economic and social value that the KLM route provides to Scotland and expressed fears that the route may be discontinued following the introduction of ADT.

“The Amsterdam route - one of the most important international connections from Inverness - is exactly the kind of route that the proposed change would damage. Routes of this kind operate on relatively thin margins at Inverness. Increased costs passed through to passengers reduce demand, thereby reducing route profitability and increasing the risk of frequency reduction or withdrawal.” - Individual

Connecting Flights

Many respondents specified the impact that removal of the international exemption would have on connecting flights. IATA shared that 81% of flights departing from Highlands and Islands airports are connecting and that the change to the exemption will increase ticket prices across many marginal routes.

Respondents were therefore concerned that demand for connecting routes would drop, possibly jeopardising the viability of the routes from the Highlands and Islands to hub airports. It was emphasised that the first leg of the flight is a time and travel cost that most mainland Scottish passengers do not have to afford and connecting flights should therefore remain exempted from ADT.

However, this opinion was not universally shared, with other responses pointing to the equity and proportionality of any tax exemption.

“It is hard to justify that a passenger travelling, for example, from Inverness to Heathrow and then on to Dubai should be exempt from paying ADT for the totality of this journey. Under the proposal, passengers travelling direct or via other airports in the UK to international destinations will pay ADT.” - Oxfam Scotland

Subsidy Control

Some respondents expressed their discontent with the restrictions placed upon ADT policy in order for the tax to be subsidy control compliant. However, no respondents provided workable proposals for an alternative approach to achieve a compliant exemption. Several respondents also indicated that they accepted the Scottish Government’s proposed subsidy control solution due to a lack of a better alternative.

“ZetTrans understands and accepts the subsidy-control and competition rationale for excluding international flights. However, we recommend ongoing monitoring of impacts on airports where limited international services exist or may emerge, and a future review mechanism to assess whether tightly defined international exemptions could be justified where clear connectivity or economic development benefits are demonstrated and subsidy-control compliant.” - ZetTrans

Incongruity with Scottish and UK Government Policies

Multiple responses expressed concern around the proposed Highlands and Islands impact on other Scottish and UK Government policy. One respondent wrote that the Scottish Government is supportive of international trade growth of Scottish business and highlighted that the removal of the exemption would undermine the connectivity required for economic growth.

Alternative Exemptions

Alternative suggestions to the proposed Highlands and Islands exemption included lowering rates for international flights instead of fully removing the exemption, retaining the exemption for the domestic leg of connecting flights and retaining the exemption for economy class passengers. As these suggestions are outside the scope of the question, they are not set out in detail here. However, they have been considered as part of the wider policy design process.

Market Distortion

Respondents who strongly or mostly agreed with the proposed removal of international flights from the exemption cited that the change would aid compliance with subsidy control as exempting international flights goes beyond the intent of the exemption.

Multiple respondents emphasised that keeping international flights from the Highlands and Islands within the scope of the exemption would maintain the market distortion that they believe is currently present under APD. Edinburgh Airport noted that exempting international flights from APD provided Inverness airport with an “artificial competitive advantage compared to Scotland’s other mainland airports.”

Inverness Airport is highlighted by multiple respondents as benefitting excessively from the APD international exemption in attracting passengers and routes, especially relative to Aberdeen Airport. Respondents noted the geographical similarities between the two airports and the challenges they both face in sustaining routes. Therefore, respondents write that the two airports should be treated equally to facilitate market fairness.

Overall, these respondents felt that the APD international exemption extends beyond the stated intent of the Highlands and Islands exemption, which is to support connectivity in geographically disadvantaged regions.

“It is reasonable to limit the exemption for international services in order to ensure compliance with subsidy control principles and to avoid market distortion. The primary justification for the exemption is to support essential domestic connectivity for remote communities, not to provide a competitive advantage for international aviation services.” - Individual

Discretionary International Flights

Multiple respondents described international flights as discretionary and believed they should not qualify as crucial connectivity routes. One individual suggested international flights are taken by a “narrower group of users” than intra-Scotland or domestic flights.

Reduce Emissions

Some respondents who supported the removal of the international exemption cited reduction of emissions as a factor, noting that an internation exemption produces significant carbon emissions in contradiction to the ‘polluter pays’ principle.

“In our view, the equity considerations are outweighed by the imperative to cut emissions and the importance of the polluter pays principle.” - Oxfam Scotland

However, some respondents expressed the view that the removal of the exemption would cause increased emissions due to passengers having to travel further to access airports with international routes.

Highlands and Islands Responses Analysis

Ten Highlands and Islands organisations and individuals responded ‘strongly disagree’. Two Highlands and Islands organisations and one individual responded either ‘mostly’ or ‘strongly agree’.

Highlands and Islands respondents who strongly disagreed with the removal of the international exemption cited serious concerns about negative impacts on international connectivity and possible loss of economically significant routes. As these themes have already been laid out, they will not be set out in detail here.

ZetTrans responded, ‘mostly agree’ and explained that their membership “understands and accepts the subsidy-control and competition rationale for excluding international flights.” ZetTrans also called for continuous monitoring of economic and connectivity impacts and for a “future review mechanism to assess whether tightly defined international exemptions could be justified where clear connectivity or economic development benefits are demonstrated and subsidy-control compliant”.

The individual that responded ‘mostly agree’ wrote that “once [Highlands and Islands residents] have got to a Scottish airport that offers international flights they are being treated as fairly as others in Scotland.” The organisation that responded ‘strongly agree’ did not explain their choice.

Scottish Government Response

The Scottish Government recognises that removing the carriage of passengers on international flights from the exemption will increase costs on those routes.

However, the consultation has not identified any viable alternatives to the proposed Highlands and Islands exemption that would comply with the Subsidy Control Act 2022 by subsidising flights while minimising the risk of competition distortion. Tax exemptions may be considered distortive of competition where they reduce costs for recipient firms and/or improve their position compared to competitors that do not receive those advantages. In a scenario where the Scottish Government included the carriage of passengers on international flights within the exemption, air carriers operating services out of airports in the Highlands and Islands region (particularly from Inverness) would be relieved of tax costs that the same air carrier or competitor air carriers operating flights departing from other airports in Scotland would be compelled to either absorb or pass on to their passengers via ticket pricing.

The Scottish Government supports international route development on an ‘airport-neutral’ basis and does not seek to interfere with competition, leaving the decision on where to locate services entirely with the commercial air carrier. The UK aviation sector operates predominantly in the private market: air carriers, airports and their investors make their own commercial decisions and are best placed to understand and service the demand of their customers.

The Scottish Government therefore intends to proceed with removing travel to international destinations (whether by direct of connecting flights) from the scope of the proposed Highlands and Islands exemption for ADT.

Question A4: How could different segments of the aviation market respond to the proposed Highlands and Islands exemption?

23 respondents answered Question A4. One respondent stated that there would be no change within the aviation market in response to the proposed exemption.

Responses that discussed alternative exemption configurations or removing the exemption are out of scope of this question and are not set out in detail.

Tourism and Leisure Passengers

Multiple respondents expressed the view that tourists may be incentivised to travel to the Highlands and Islands region due to inbound flights from Scotland airports being added to the exemption.

It was also suggested that some passengers may book legs separately to preserve the domestic exemption.

Business Passengers

One individual noted that business passengers will be “most sensitive to the removal of the international exemption” and that “increased costs will accelerate the existing tendency of Highland business travellers to use Aberdeen, Edinburgh or Glasgow as their departure airport, driving longer surface journeys and reducing the viability of Inverness routes.”

Regional and Domestic Carriers

Several respondents agreed that the proposed exemption would help stabilise important connectivity services in the Highlands and Islands regions.

“Regional and domestic carriers are likely to view the exemption as supporting route stability and predictability, particularly on marginal or low-volume services. This may encourage retention of existing routes rather than speculative expansion.” - Individual

While one respondent did not think the response would be greater than stabilisation of current routes, several other respondents wrote that the proposed exemption may see improved route viability and airlines introducing new routes to and from the Highlands and Islands. This increased route viability was attributed to the addition to the exemption of flights from Scottish airports to Highlands and Islands airports.

Some respondents highlighted Inverness as the airport most likely to see leakage to other Scottish airports for passengers wishing to take a connecting flight to an international destination.

Some respondents also expressed concern about the relatively lower profit margins of domestic and regional carriers, which might lead to increased ticket prices and possible closure of routes.

“The fragility of the domestic aviation market can be seen from the fact that there have been 2 domestic airlines crease trading in the last 12 months with Blue Island and also Eastern Airways. Margins of profitability on domestic routes is low and any additional costs such as the introduction of ADT could be a barrier to travel for many people thus threatening the existence of the domestic market from the Highlands area.” - Scottish Passenger Agents’ Association

Large and International Carriers

Some respondents considered the proposed exemption to have a negligible effect on large carriers, particularly those that focus on domestic routes.

“Larger carriers operating hub-and-spoke models are unlikely to materially change behaviour, as the exemption is geographically limited and focused on domestic connectivity rather than competitive advantage.” - Individual

However, several respondents expressed their concerns regarding the financial impact the removal of the international exemption may have on airlines that run international routes. British Airways and KLM were highlighted as carriers most likely to reconsider route viability where increased costs reduce profit margins. Concerns were also raised on the removal of the exemption for connecting flights and the risk of demand leakage to non-Highlands and Islands airports for the first leg of overseas routes.

“On the other hand, no longer exempting direct and connecting international flights from airports in the Highlands and Island risks major airlines like KLM and BA taking their business away from Inverness Airport.” - Scottish Tourism Alliance

Charter and Specialist Operators

Two respondents addressed charter operators’ response to the proposed exemption. One respondent suggested that there may be an increase in domestic route viability and development. However, another respondent noted that operators of international routes may be less resilient to any price increases caused by the removal of the international leg of the exemption.

Scottish Government Response

The Scottish Government recognises that the proposed Highlands and Islands exemption is expected to impact air carriers’ costs for routes departing from the region.

In relation to the carriage of economy passengers, the Scottish Government’s proposal to additionally exempt the carriage of passengers on flights from Scottish airports where the final destination is an airport in the Highlands and Islands region will reduce air carrier costs by £8.26 per passenger in 2027/28. In relation to the carriage of economy passengers flying internationally from the Highlands and Islands region to European destinations, the Scottish Government’s proposed changes to remove these flights from the proposed exemption will increase costs for air carriers by £15.49 per passenger in 2027/28.

The Scottish Government has no role in determining whether, or the extent to which, tax savings or increases may or may not be passed on to passengers via ticket prices, as the setting of ticket prices is a commercial matter for air carriers to determine.

Question A5: What impact could the proposed Highlands and Islands exemption have on these factors: customer demand, route viability, regional economic development, and any other factors?

34 respondents answered Question A5.

Two respondents expressed the view that there would be negligible impact, and one respondent could not provide any examples. Responses that are out of scope of Question A5 are not set out in detail, including responses that discussed potential impacts of removing the Highlands and Islands exemption. Themes that have been previously set out for previous responses are not set out in detail here.

Intra-Scotland and Domestic Routes

Customer Demand and Route Viability

It was emphasised that the current APD exemption provides crucial support for Highlands and Islands connectivity and that the proposed ADT exemption will continue to do so. Furthermore, multiple respondents suggested that customer demand for intra-Scotland flights will modestly increase for both tourists and Scottish residents due to the proposed exemption of inbound flights from Scottish airports to Highlands and Islands airports.

However, two respondents raised the concern that airlines may choose their routes based on the tax exemption instead of customer demand.

Regional Economic Development

Some respondents suggested that the expansion of the exemption to include flights from Scottish airports to the Highlands and Islands will support business connectivity.

“Regional economic development may benefit through improved labour mobility, tourism resilience, and business connectivity, especially for small and medium enterprises.” – Individual

Population Retention

Several respondents highlighted that the proposed exemption would support population retention and possible growth in the Highlands and Islands by making essential travel affordable.

Social Cohesion

Two respondents noted that the exemption will contribute to social cohesion within the Highlands and Islands and the rest of Scotland by exempting both legs of return flights to the region from other airports in Scotland.

International Routes

Customer Demand and Route Viability

Respondents raised concerns about the sustainability of international routes due to increased tax burden on airlines as a result of removing the international exemption. It was noted that passengers from the Highlands and Islands may travel to other UK airports for lower ticket prices or may simply be unable to fly internationally at all.

“International direct services to and from Scotland need a critical level of support for airlines to consider operating them.” – Scottish Passenger Agent’s Association

Two respondents also highlighted that a drop in demand for connecting flights in particular may result in all legs of the route becoming commercially unsustainable.

Regional Economic Development

Multiple respondents emphasised the negative impact that the removal of the international exemption may have on the Highlands and Islands’ economy. They noted that decreased inbound tourism and business travel could detrimentally affect revenue for the tourism sector and economic investment in Highlands and Islands region.

“A deterioration in route viability at Inverness, driven directly by a tax policy change, will reduce the attractiveness of the Highlands as an investment destination and undermine the return on the substantial public investment already committed to the region's economic development.” - Individual

Other

Environmental Impact

Several respondents raised concerns about the increased emissions if more routes are introduced in Scotland. One respondent also highlighted that passenger leakage to central-belt airports from the Highlands and Islands may result in increased emissions due to longer surface travel.

Scottish Government Response

The Scottish Government will proceed with the introduction of the proposed Highlands and Islands exemption. While the Scottish Government recognises the concerns raised by consultation respondents about the potential impacts on international Highlands and Islands aviation connectivity, this decision is based on the evidence received that domestic connectivity will be supported and bolstered by the proposed exemption. Crucially, this is achieved in a manner that complies with subsidy control.

Question A6: Do you agree that the carriage of passengers on private jets should be not included within the scope of the exemption?

Of those who answered this question quantitatively (41 respondents), the breakdown of views was as follows:

Response	Total	Percentage
Strongly Agree	28	68%
Mostly Agree	4	10%
Mostly Disagree	4	10%
Strongly Disagree	5	12%

A full breakdown by respondent type is provided in the table below:

Respondent Type	Strongly Agree	Mostly Agree	Mostly Disagree	Strongly Disagree
Airlines	4	0	0	1
Airports	0	0	1	1
Travel/Tourism	0	0	3	0
eNGO	5	0	0	0
Public Body	3	0	0	0
Individual	15	2	0	3
Other Organisations	1	2	0	0
Total:	28	4	4	5

Inelasticity of Private Jet Demand

Many of the respondents who agreed that private jets should not be included in the Highlands and Islands exemption expressed the view that private jet passengers can easily afford aviation taxes. It was pointed out that users tend to be high-net-worth individuals who already pay high operational costs and can afford an increase in ADT.

“The exemption is designed to support communities economically for vital connectivity and as a form of public transport. Private jet users tend to be very wealthy, high-emitters and do not require additional financial support or tax cuts.” - Safe Landing

Equity

Similarly, other respondents highlighted that including private jets in the Highlands and Islands exemption is not supported by the Scottish Government’s equity rationale for improving connectivity across the geographically disadvantaged region. It was noted that private jet travel is a discretionary form of travel and does not contribute to connectivity for the vast majority of Highlands and Islands residents or visitors.

“I agree that passengers travelling by private jet should not be eligible for the Highlands and Islands exemption. The exemption is designed to support connectivity for communities and businesses that depend on commercial aviation services. Private jet travel serves a fundamentally different market and the inclusion of private jets within the exemption would represent a subsidy to high-net-worth individuals that is neither necessary nor justifiable on connectivity grounds.” - Individual

Emissions

Some respondents also emphasised the high level of emissions that private jets produce and that excluding private jets from the exemption is in line with the Scottish Government’s commitment to the ‘polluter pays’ principle.

Services Provided by Private Jets

Respondents who mostly agreed with the proposal caveated their agreement with the condition that the provision of important services should remain exempt, rather than being caught by the private jet definition. This includes emergency services, urgent medical trips and flights where scheduled commercial flights are extremely limited. Two respondents suggested further research into potential impacts on vital services as a result of excluding private jets from the exemption.

“The exemption exists to protect essential connectivity. Private jet use is discretionary. It is reasonable that these passengers contribute fully through ADT, provided that air ambulance, search and rescue and essential public service flights are excluded.” - Loganair

Economic Contributions

Respondents who strongly disagreed cited the economic benefits that high-net-worth users of private jets bring to the Scottish economy through tourism and business. Respondents expressed the view that excluding private jets from the Highlands and Islands exemption could cause demand leakage to other countries and lose their economic contributions to Scotland.

“There should be no reason to segregate Business jets from any exemption for commercial flights. Business jets bring in investment and enable connectivity to a far greater number of places than schedules will ever be able to.” - Air Charter Association

Complexity

One respondent suggested that excluding private jets from the exemption may create operational complexity and inefficiency within ADT’s structure.

Highlands and Islands Responses Analysis

11 Highlands and Islands organisations and individuals responded to question A6. Nine responded ‘strongly agree’, and two responded ‘mostly agree’.

One organisation, Highlands and Islands Airports Limited, responded ‘strongly disagree’, writing that “all forms of air travel through an incentive such as the exemption should be encouraged.”

Scottish Government Response

The Scottish Government recognises that private jets may also be used for a range of purposes, including humanitarian and authorised emergency medical service flights. These specific operations are exempt from ADT.

Including the carriage of passengers on private jet flights within the exemption would go beyond the exemption’s stated policy objective of protecting Highlands and Islands aviation connectivity. The Scottish Government also understands that private aircraft generally carry far fewer passengers than commercial flights and emit more carbon emissions per head.

Therefore, the exemption will only apply to the carriage of passengers on commercial flights and will not extend to the carriage of passengers travelling on private jet flights.

Question A7: Will air carriers face any operational or administrative challenges in applying the proposed Highlands and Islands exemption?

35 respondents answered Question A7.

Two respondents said there would be no challenges with no further explanation. Four respondents said there would be challenges with no further explanation. Three responses are out of scope, while responses discussing the Air Discount Scheme (ADS) are not set out in detail.

System Familiarity

The majority of respondents indicated that there would be limited operational and administrative challenges, as airlines are already familiar with the existing APD Highlands and Islands exemption and any further system changes would be minimal. It was also noted that carriers regularly manage different tax schemes. Respondents emphasised the importance of clear guidance to support a smooth transition to ADT.

“Airlines generally already manage differing tax rules across multiple markets, and should therefore be able to adapt their systems to accommodate an ADT exemption as long as it is not overly complicated and in line with similar schemes elsewhere.” - Edinburgh Chamber of Commerce

Implementation Timeline

Many respondents expressed concern regarding the short implementation timeline for ADT. Several respondents indicated the timeline was tight but not insurmountable. It was also noted that a simple tax system would help reduce disruption to airlines.

Other respondents emphasised the cost to carriers for developing an ADT administrative system and that the administrative changes were only possible with a long lead-in time for airlines to complete operational preparations.

“There will be additional costs for carriers in having to deal with two tax regimes. For this reason, it is important that the Scottish replacement tax administration is kept as similar as possible to the current UK arrangements to minimise complexity and the administrative burden.” - Airlines UK

Respondents also note concerns around tickets already being sold for flights departing on or after 1 April 2027. Multiple airlines explained that tickets currently being sold have APD factored into the price, rather than the future rate of ADT that the taxpayer will be liable for at the time of departure. Respondents emphasised that this creates a commercial risk, as airlines may unexpectedly operate Highlands and Islands routes at a loss, jeopardising route sustainability and increasing ticket prices. Adjustments to the reporting system to reclassify flights as chargeable under ADT may be time consuming and potentially require manual identification, further increasing costs for carriers.

“First, there are immediate implications for tickets already on sale for travel after 1 April 2027. Airlines have published or will soon schedule and begin selling seats for this period. If the ADT framework ultimately remains unchanged, the switch from collection by HMRC to collection by Revenue Scotland will still require functionality and coding adjustments. However, where rates or exemptions are amended after sales have opened, airlines generally cannot re-invoice customers. - IATA

In addition, respondents highlighted challenges around identifying connecting flights as this may require a more complex IT system. It was noted that airlines may have to develop a system that can isolate individual legs of connecting flights in order to assign the correct level of tax to each ticket.

Some respondents were also concerned at the possibility of passengers being liable for both APD and ADT simultaneously and requested clarification on mechanisms to prevent double taxation.

Scottish Government Response

The Scottish Government is working with the aviation industry and other interested parties to ensure ADT is successfully implemented from 1 April 2027. This engagement is in conjunction with Revenue Scotland who will administer and collect ADT.

Connected flights are treated as one journey under the Air Departure Tax (Scotland) Act 2017, with the passenger's final destination determining which tax band applies. The amount of ADT due is then determined by their class of travel. Connected flights must be shown on the same ticket or on conjunction tickets and meet the time-related rules. This approach ensures that passengers transiting through UK airports are not subject to double taxation. Passengers connecting via the rest of the UK will therefore not be liable for both ADT and APD