The government ignored aviation and travel industry requests to cut or suspend Air Passenger Duty (APD) in the Budget and instead announced an inflation-linked rise in the tax on flying.
Chancellor Rishi Sunak made no reference to APD in his Budget speech, but documents released by the Treasury reveal APD rates will rise in line with the Retail Price Index (RPI) rate of inflation from April 2021.
Airlines and industry associations reacted with disappointment.
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British Airways parent IAG said in a statement: “Given the acute pressure on business, the hike in APD will make it even harder for UK firms to trade overseas. This is a tax on business.”
IAG noted it paid “around £1 billion in APD last year” and said: “If the government is serious about making Britain a global trading economy, the world’s highest aviation tax should be scrapped.”
Abta chief executive Mark Tanzer said: “We’re disappointed by the inflationary increase in APD which puts the UK at an even greater competitive disadvantage.”
The Treasury did confirm it will consult on reform of APD on domestic flights this spring – in line with a pledge made in January as part of a temporary rescue of regional airline Flybe.
But it made clear the review will be limited to “the case for changing the APD treatment for domestic flights, such as a return leg exemption”.
The Treasury will also consider “increasing the number of international distance bands”.
APD is currently levied on UK-departing flights in two distance bands – up to 2,000 miles and beyond 2,000 miles.
Tanzer welcomed the commitment to review domestic APD but said: “We strongly urge the Government to do this as part of a wider reform process, as the catalyst for discussions between industry and government about a more comprehensive overhaul of APD.”
Dale Keller, chief executive of BAR UK which represents non-UK airlines operating to and from Britain, declared the industry would be “deeply frustrated” with the Chancellor.
He said: “It’s ludicrous he has given concessions to alcohol but increased APD. Airlines had requested a temporary six-month waiver of APD as a supporting measure while they deal with this unprecedented situation.
“The lack of action and support for aviation in this Budget demonstrates a Government and Chancellor with little regard for sustaining the UK’s air connectivity.”
Airlines UK chief executive Tim Alderslade said: “Aviation has been crying out for short-term support as we deal with an unprecedented crisis caused by coronavirus and the collapse of Flybe.
“The review into the impact of APD on domestic aviation and expectation that once the Brexit transition phase is over the double whammy on regional carriers will end is welcome.”
But he added: “APD is a damaging tax and completely counterproductive to the aims of making Britain a global trading nation.
“This is the most serious period for the sector since 9/11. Questions remain as to whether this fact is understood within Government.”
British Airline Pilots Association general secretary Brian Strutton said: “We called on the government last week to suspend APD for six months in an effort to support our airlines, which are already being hit hard by a reduction in bookings due to coronavirus.
“Removing APD is just one simple step they could have done to give airlines the support they need to get through what will be a difficult summer, yet the budget has been and gone and we’re incredibly disappointed that there was no mention of how our government is going to help our aviation industry.
“Unless the government wishes to see more UK airlines go under we must see some urgent action from the Treasury – we can’t wait until spring for this situation to be addressed.”
Manchester Airports Group chief executive Charlie Cornish said: “The government is right to prioritise major and sustained investment in infrastructure. Linking up businesses and communities within the UK and to markets overseas is the only way to support long term growth for the whole country.
“However, the UK needs a thriving aviation sector to deliver Global Britain.
“Many airlines are looking to invest in the UK, and the government should support them with an immediate cut to APD while it carries out its fundamental review of aviation taxes.”
In practice, the inflation-linked increase in APD will mean no rise in the lower rate of APD on economy flights within Europe which will remain at the current £13 per passenger.
This rate is unchanged since 2015.
The rate of APD on medium and long-haul flights was already due to rise by £2 per economy passenger from April 1 this year to £80 per passenger.
In line with the Budget, the economy rate on longer flights will now rise by another £2 from April 2021 to £82, and by double that amount on premium economy and business passengers.