An initiative to restore flights between the City of Derry Airport (LDY) and Dublin (DUB) after a 15-year absence is facing an immediate financial hurdle, raising concerns over regional infrastructure. While the Irish Government has committed 2 million euros from its Shared Island Fund to establish this Public Service Obligation (PSO) route, the UK Treasury has refused to waive Air Passenger Duty (APD) on departures, citing rules that limit tax exemptions to flights operating solely within the UK.
Tax hurdle undermines route viability
The cross-border initiative is heavily dependent on the PSO framework, under which governments subsidise essential flights that are less economically sustainable. This model previously supported the former Derry-Dublin service before it was withdrawn in 2011.
APD – a departure tax on UK-based flights – is charged to airline operators and typically added to passenger costs through ticket prices.
Leaders within Stormont, Northern Ireland’s Assembly, have criticised the British Government’s stance on the policy, accusing ministers of holding a regulatory double standard. While the Derry-to-London Heathrow (LDY-LHR) PSO benefits from financial backing and a full APD exemption to secure its viability, the same tax-free status hasn’t been granted to the Dublin route due to its cross-border status.
Although the UK Government insists that exemptions only apply to routes departing and arriving within the UK, a spokesperson stated they are open to talks on the matter. The Irish Government, which is funding the service, and is preparing a Request for Tenders ahead of an intended October resumption, has stated that APD remains “a matter for the UK government”.
Stormont warns of threat to regional economy
Stormont representatives have challenged the policy’s alignment with the British Prime Minister’s pledge to deliver growth in “every postcode,” arguing that the refusal to waive the tax penalises a regional airport, essential to the infrastructure of the North West.
Stormont’s Economy Minister, Caoimhe Archibald, expressed her disappointment over the decision, warning that imposing APD on a newly restored route would directly inflate passenger costs, and:
“run entirely contrary to the objective of ensuring the sustainability of the route because of its regional significance.”
The aviation sector has consistently argued that the tax stifles regional connectivity and that it threatens the long-term sustainability of the service, diluting the intended impact of the public subsidy.
Archibald – who has committed 4 million pounds in annual investment to develop City of Derry Airport (LDY) – has vowed to continue lobbying London to lift the tax before operations are set to begin later this year.
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