Airlines Call On Govt To Ground Passenger Tax

Britain's biggest airlines have put their rivalries aside to call for the scrapping of taxes on air travel that are expected to cost passengers £2bn this year.

In a letter to the Chancellor, George Osborne, they blame Air Passenger Duty (APD) for three years of declining passenger numbers at UK airports which are now lower than in 2004.

The letter was signed by normally bitter rivals Willie Walsh, chief executive of British Airways parent company IAG, easyJet chief Carolyn McCall, Ryanair boss Michael O'Leary and Virgin Atlantic chief executive Steve Ridgway.

Mr Walsh said: "We are absolutely united today on the issue of APD.

"We believe it has a negative impact on the UK economy that far outweighs any benefit from the tax revenues that are raised.

"It's strangling jobs in the tourist industry. It's telling foreign investors to take their money and generate prosperity elsewhere."

APD was introduced as an environmental tax in 1994 but it is also an important source of revenue for the cash-strapped Treasury.

Speaking on Jeff Randall Live, Ms McCall said: "This is not about the airlines, this is about passengers and it is about taxing families."

Chief executive of Virgin Atlantic, Steve Ridgway added that scrapping the tax would help boost the UK economy."The overall value to the UK economy, if this tax was scrapped and we saw higher levels of economic activity, we saw more jobs in tourism and more jobs in aviation would be far greater than the revenue that is being raised by APD," he said.

"That's why we're calling on the government to scrap the tax and carry out an independent review and really look at what the true costs of this tax are."

The tax adds from £12 to £170 to the price of flights from the UK, depending on the destination and whether it is an economy or first-class ticket.

The rates charged have risen sharply since 1994 when they ranged from £5 to £40.

The airlines highlighted the case of the Netherlands, where an air tax scheme was abandoned after a year.

Mr O'Leary said: "The 300m euros it raised was far less than the 1bn euros the Dutch economy lost in visitor numbers and lost tourism spend.

"And the Dutch aren't the only ones. The Belgians proposed a tax but then scrapped it. The Irish followed the UK with a travel tax at 10 euros but have since reduced it to 3 euros, having seen the damage it did to the economy."

In 2010, there were 7.4 million fewer passengers in the UK, while numbers using European airports grew by 66.3 million.

The Treasury froze APD this year but it is feared a backdated increase will be announced by the Chancellor in his Autumn Statement later this month.

The airlines have pointed out they will begin paying another environmental tax when the EU Emissions Trading Scheme begins next year.

The chief executives challenged the Chancellor to commission an independent report on the true economic effects of aviation tax in Britain.

They said APD doubled in 2007 and rose again in each of the last two years, and that the UK had the highest aviation taxes in the world.

The Treasury has said that it will reveal its response to a consultation on the future of APD in the coming weeks. It looked at ideas such as simplifying the tax and making it fairer by including private jets.

A Treasury spokesman added: "It is also important to remember that the UK is not the only country with an passenger duty, and unlike many other countries the UK does not levy VAT on flights."

:: In a separate development, British Airways and Virgin Atlantic have been reportedly handed fines of $135m (£85m) and $100m (£63m) respectively in Nigeria.

Virgin says the case relates to what it calls historic passenger fuel surcharges and it does not believe any laws were broken.

A BA statement said: "We reject the allegations made by the Nigerian Civil Aviation Authority and we are vigorously defending our position."