Major tour operators are considering a legal challenge to the Government over the doubling of Air Passenger Duty from February 1 with a decision expected next week following discussions with lawyers.
Federation of Tour Operators director-general Andy Cooper said: “We don’t know yet whether there are grounds for a challenge. We are seeking advice as to whether a judicial review would be possible.”
A speedy legal move might result in a court delaying implementation of the APD increase. However, that would cause fresh difficulties since tour operators and airlines added the increase to reservations systems before Christmas.
The more likely outcome, if a challenge proved successful, would be for the Government to refund the APD on bookings made before the rise was announced.
Chancellor Gordon Brown unveiled the increase in his pre-Budget Report on December 6, sparking anger in the industry because it must be paid on millions of bookings already made. Previous rises have been introduced with a minimum seven-month lead-in.
The trade believes it has been unfairly treated. A tour operator source said: “The airlines have terms and conditions that allow them to charge customers. We are disadvantaged by the Package Travel Regulations, but the Treasury basically said, ‘We don’t care; live with it’.”
The PTRs mean tour operators must absorb any tax increase up to the value of 2% of a holiday. With the average price of a package holiday at £500, companies would have to pay the £5 APD increase on short-haul economy fares and £10 on long-haul themselves.
“We could only charge on holidays costing less than £500, and there is not much point,” said one tour operator. “The Government can’t put the PTRs to one side, but it could refund the money.”
The FTO estimates the APD rise will cost the trade £50 million.
Class struggle
The industry appears to have extracted one possible concession from the Treasury, which has promised to review the APD rate on premium economy bookings.
A source close to the talks revealed: “The Treasury is aware that APD penalises the leisure traveller in premium economy.” Any change would likely be announced in the Budget in March.
Premium economy passengers are now taxed at the same rate as business and first class even though they fly in much less comfort.
Passengers on the growing number of business-class-only carriers pay APD at the same rate as those in economy.