BA boss: airport tax will damage UK economy

Willie Walsh, British Airways (BA) chief executive, said the plans to bring in the new Aviation Passenger Duty – or APD – would damage both the airline industry and the economy and must be reviewed.

The taxes will also be a blow to would-be holidaymakers, business people and other travellers. A family of four planning to travel to Australia will now have to pay £340 in tax extra for their return ticket.

Every passenger travelling from 1 November onwards will have to pay the charge – but because the tax hike has been expected for some time, airlines anticipated the extra cost and passengers who have already booked their tickets for travel after this date paid the charge in their ticket price.

Any passenger booking tickets now for travel after 1 November will see their tickets increase in price significantly as a result of the APD.

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 November, a higher tax rate will have been, or will be in future, 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
Finish

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 

Tax hampers growth

Mr Walsh hit out against the tax as BA, which has been rocked by the recession, the volcanic ash cloud and strikes by its staff, returned to a profit for the first time in two years. It reported pre-tax profits of £158m for the first six months of the year.

Mr Walsh said his airline’s ability to grow would be severely hampered by the airport tax.

“I think the Government is naive if they think that they can increase APD and expect aviation to generate new jobs,” Mr Walsh told 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.”

He added: “I think these taxes need to be reviewed and I think the review needs to be serious.”

Long-term

The BA boss said that business people were already expressing concern over the introduction of the new duty and that it would discourage firms from doing business in the UK, at exactly the time when the Government wanted to do the opposite.

“When I travel and talk to business people abroad they do highlight this, the high levels of APD, as discouraging them from doing business with the UK because they see it as a tax on doing business and that’s the problem with this,” he said.

“I think the revenue that’s raised is clearly important and is identifiable but I genuinely believe it’s doing more harm to the economy overall and is therefore counterproductive.”

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Mr Walsh said he had made representations to the Treasury as recently as this week, showing them the results of BA’s own analysis that demonstrates that the money raised by the new passenger tax would be offset by the financial loss to the economy overall.

He cited the example of the Netherlands where the Government hiked passenger duty and only raised about 340 million euros in extra revenue. But the loss to the economy was measured at 1.2 billion euros so the tax was subsequently scrapped, Mr Walsh said.

“If I’m honest I’m not sure that they’re fully convinced about it,” Mr Walsh said referring to his conversations with the Treasury. “I think they can see the revenue and they like that.”

I think the Government is naive if they think that they can increase APD and expect aviation to generate new jobs. BA chief Willie Walsh

With the introduction of the tax next week, a family of four would have to pay £48 for a return ticket to Europe, up from £40 currently. Or an individual travelling to Barbados would have to pay £75 in tax.

Cabin crew dispute

Mr Walsh also said he was hopeful of a resolution in the long-running dispute between BA and its striking cabin crew staff. Recently, he put a deal on the table that gave staff back their travel perks and allowed them to take into account their length of service when buying discounted tickets.

The issue had become the bugbear of the dispute. But so far, union officials at the British Airways Stewards and Stewardesses (BASSA) have not recommended the deal to its members, which Mr Walsh has said must happen for the issue to be resolved once and for all.

“It’s a deal that is fair. It’s a deal that represents a serious resolution to this dispute. I’m satisfied that this is the end of it,” he said.