The burden of Air Passenger Duty is compounding financial woes at Flybe which is being forced to cut 300 UK jobs.
The regional carrier, which is heading for losses of more than £14 million this year, is paying out £68 million in APD a year, or 18% of its UK ticket revenues.
This is three times the percentage paid by rivals British Airways and easyJet because a bigger proportion – three quarters – of Flybe’s passengers fly on domestic routes, obliging them to pay APD twice.
APD is levied on all flights that depart a UK airport and the UK has the highest rate in the world, according to the Fair Tax on Flying campaign group.
The airline is urging its staff and unions to lobby the government to introduce a two-tier regime, which would see passengers flying from regional airports pay less in tax and those departing from one of the London airports shoulder a slightly greater cost.
Flybe chief executive Jim French said the carrier would generate a “nice healthy profit” if it paid the same in percentage terms as its competitors.
Reducing Flybe’s APD bill to 6% of UK ticket revenues would result in a £45 million lower tax burden each year, French told the Daily Telegraph.
He has spoken to the prime minister’s advisers, the deputy prime minister and the transport secretary about the burden of APD.
“You could significantly reduce the charges of APD in the regional aviation and domestic sector with a relatively small increase in the departure tax out of the London airports, where disposal income is much higher, where businesses are more successful and where there is a high congestion charge,” French said.
The airline has been unable to pass on all APD costs to customers due to the consumer downturn and had to help meet the bill through savings.
A Treasury spokesman denied that APD was to blame for the 300 job losses.
“The government took action to freeze Air Passenger Duty in 2011, even after last year’s rise most passengers will only pay an extra £1 in APD,” he told the newspaper.
“The airline industry also benefits from an historically low rate of corporation tax, the fact that the UK does not levy VAT on domestic flights and aviation fuel not being taxed.”