Airlines Urge Chancellor to Reconsider Tax Hikes in Budget

Two major airlines, Ryanair and Wizz Air, have strongly advised the UK Chancellor, Rachel Reeves, against increasing taxes on the aviation sector in the forthcoming Budget. Both companies argue that higher taxes could result in carriers relocating aircraft out of Britain, a move anticipated as the government prepares for a potential increase in Air Passenger Duty (APD).

Currently, the UK holds the distinction of having the highest APD globally, which operates on a band structure that varies based on destination and class of travel. This tax is expected to generate approximately £4.5 billion for the public purse in the fiscal year 2025-26, according to the Office for Budget Responsibility. Reeves is expected to announce tax increases and spending cuts on November 26, 2023, to address a public finance shortfall estimated between £20 billion and £50 billion.

Concerns Raised by Airline Executives

Eddie Wilson, the Chief Executive Officer of Ryanair, expressed serious concerns about the implications of rising APD rates. He indicated that such increases would discourage the airline from deploying new aircraft on UK routes. In an interview with the Financial Times, Wilson noted that Ryanair has already reduced some services from Newquay, Cornwall, opting instead for routes to Sweden, where the APD has been abolished. He emphasized, “Airlines are the most mobile investment in the world… But the dull grey people in the Treasury don’t see that, they think the aeroplanes are just there.”

Michael Delehant, Chief Operations Officer at Wizz Air, echoed Wilson’s sentiments, warning that Britain’s aviation industry could experience significant growth limitations if tax rates rise. He highlighted a recent decision to move aircraft from Vienna, Austria, to Bratislava, Slovakia, due to escalating airport costs. Delehant remarked, “When you’re at the price-sensitive part of the chain, you have to… Vienna was the perfect example. That’s your case study.”

The Impact of Taxation on Aviation Growth

The UK government reviews APD rates annually, and the potential for an increase raises important questions about the future of the aviation sector. Both Ryanair and Wizz Air are closely monitoring the situation, recognizing that any tax hikes could prompt a shift in their operational strategies.

The airline executives’ warnings highlight a broader concern about the competitive landscape for airlines operating in the UK. With options to relocate or adjust service routes becoming increasingly viable, the decisions made in the upcoming Budget could significantly influence the future trajectory of Britain’s aviation industry.

In conclusion, as Rachel Reeves prepares to unveil her Budget plans, the aviation sector remains on high alert, keenly aware that decisions made at this juncture could have lasting implications for their operations and the broader economy. The ongoing discussions around APD not only reflect fiscal strategies but also underline the delicate balance between taxation and industry growth.