Airlines attack ‘unaffordable’ air tax increase

From Monday the Air Passenger Duty (APD) will rise, in some cases by as much as 50 per cent, adding up to £100 to the cost of a family holiday.

A number of travel operators, including Virgin Atlantic and Thomas Cook, have criticised the plans saying they will make family holidays “unaffordable for many”.

British Airways, which today posted its first half year pre-tax profits in two years, said it will hit British holidaymakers as well as those visiting the UK.

Air tax increase

Varying APD rates are dictated by the classification of worldwide destinations – with passengers taking trips to the Caribbean being particularly badly hit.

That’s £450m that British Airways does not have. BA chief exec Willie Walsh

Those flying economy class to the Caribbean from next week will each pay £75 in APD – a 50 per cent hike on the previous rate.

The Caribbean has been put in Band C which means that passengers will be paying more to fly, for example, to Barbados which is only an eight-hour trip, than to Los Angeles which is a near-12 hour flight. The USA has been put in Band B where APD rates are slightly lower.

Virgin Atlantic said today that a family of four holidaying in Florida from next week would be paying a total of £240 in APD.

BA boss: Airport tax will damage UK economy 
"I think the Government is naive if they think that they can increase APD and expect aviation to generate new jobs," BA boss Willie Walsh tells Channel 4 News.

"I support the need to improve the efficiency of the public service. But we do have to make sure that we're not doing anything today that's going to undermine the long-term competitiveness of the UK economy. I think APD is a good example of where it is damaging the long term."

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Two people visiting Australia and flying in premium economy class would, from Monday, pay £170 each – the highest APD rate.

Virgin Atlantic’s chief commercial officer Julie Southern said: “Holidays are an essential part of our lives and are valued even more in these difficult economic times.

“With passengers now being asked to pay up to 10 times more tax since APD’s introduction, the annual family holiday will become unaffordable for many.”

British Airways

BA’s Chief Executive Willie Walsh said airlines cannot afford to take on the tax burden and warned that budget airlines would be hit hardest.

“We’re talking about paying almost £450m on an annual basis to the Exchequer through this tax,” he said.

“That’s £450m that British Airways does not have. I don’t believe easyJet has the money to pay this tax and take it on.

“These are very significant tax burdens that need to be addressed by the Government if we are to contribute to the economic recovery that everybody wants to see.”

The airline chief was speaking as the company reported pre-tax profits of £158m in the six months to the end of September.

The figure is more than double the £73m that had been expected by analysts. The last time the company reported a half-year profit was in the six months ending September 2008.

Earlier this year BA reported a pre-tax loss of £164m for April to June, attributable in part to the ash cloud scheduling problems and the staff strikes.

Air tax - will I be affected?
All airlines, travel agents and air passengers in the UK will be affected by the increased charge, which comes into force on Monday 1 November. The tax changes are irrespective of when the ticket was booked - if travel was booked for after 1 Nov a higher tax rate will be charged.

The increase is grouped into four bands depending on distance: 
Band A (0-2,000 miles from London includes European destinations) 
Price - Economy: £12 Premium: £24 Tax increase: 9 per cent

BAND B (2,001-4,000 miles includes Egypt and USA) 
Price - Economy: £60 Premium: £120 Tax increase: 33 per cent

BAND C (4,001-6000 miles includes Caribbean and South Africa) 
Price - Economy: £75 Premium: £150 Tax increase: 50 per cent

BAND D (more than 6,000 includes Australia and Singapore) 
Price - Economy: £85 Premium: £170 Tax increase: 55 per cent 

‘No environmental impact’

Manny Fontenla-Novoa, chief executive of travel company Thomas Cook Group, said the tax increase was disappointing.

“We have strenuously voiced, and will continue to do so, our disappointment to the Government that is has continued with its plans to increase APD,” he said.

“In either in its current form of a per-passenger duty, or the per-aircraft option being discussed by the coalition Government, there is no evidence of this tax having any environmental benefit and we will continue to lobby on behalf of our holidaymakers.”