An airline and a destination with most to fear from rising Air Passenger Duty (APD) have dismissed concerns a fresh tax hike in November will deter travel.

Air New Zealand will defy widespread anxiety in the industry by launching a dedicated premium economy cabin comprising one-quarter of the seats on flights from the UK next April, despite a new APD rate of £170.

By contrast, Tui Travel is prepared not to install premium economy seats in its fleet of Boeing 787 Dreamliners because of the tax.

Air New Zealand unveiled its new seats as Australia’s tourism marketing body revealed APD rises had barely dented UK demand for the country. Rodney Harrex, Tourism Australia general manager for Europe, told Travel Weekly: “We have not seen a direct impact.”

Abta has led industry criticism of the tax amid intense lobbying against a further increase by airlines, operators and Caribbean tourism ministers – six of whom were in London last week.

Abta chief executive Mark Tanzer said: “Our concern is that these increases could not be worse timed, with the pressure on people’s finances.”

Ed Sims, Air New Zealand group general manager, said: “The price hike in APD is unnecessary, but it does not worry me. We are investing in premium economy because it is worth investing in. No one has built a bespoke premium economy seat before. This is not an economy seat with extra legroom.”

Sims added: “We fly further than anyone in the world. People will see the value of premium economy when they fly for 24 hours.”

Australia saw a 3% year-on-year fall in UK arrivals in the first half of 2010, and a 1% fall for the 12 months to June, which might be attributed to a rise in APD last November. However, Harrex blamed the decline on other factors.

He said: “The big challenges have been the decline in the value of sterling, and the volcanic ash in April when people couldn’t travel. Our arrivals from the UK were down 20% in April – that is 11,000 people, and you don’t get those visitors back immediately. Australia has not had a bad year from the UK; you have to put it in perspective.”

Harrex pointed out that the 1% decline in the past year came against a 15% fall in all overseas trips from the UK in 2009, saying: “We went against the trend last year.” UK visitor numbers to Australia from January to June this year were close to 28% up on the same period in 2008 when APD was lower.

APD on fares to Australia and New Zealand will rise to £85 in economy from November 1, and double that in premium economy and business class. But Harrex does not foresee a problem. “Forward bookings through to January are OK, and that is not a bad indicator,” he said. “When people plan to go to Australia, £30-£40 is not the deciding factor. I don’t believe people will say, ‘We’re not going because of APD’.” 

● Air New Zealand will launch new cabins, catering and entertainment on its London-Auckland flights via Los Angeles next April, claiming “a two-year leap on the competition”. The carrier’s Business Premier cabin will include lie-flat beds and mattresses, with meals cooked from scratch in induction ovens. The premium economy Spaceseat will be on a par with some airlines’ business class and the new economy will offer Skycouch rows of seats that create a flatbed. Group general manager Ed Sims said: “No other airline can replicate these.”