Business class air fares in the UK will rise, the Chancellor confirmed today in the Spring Budget, breaking a pledge to the airline industry.
Jeremy Hunt said he would make a “one-off adjustment” to rates of Air Passenger Duty (APD) on “non-economy flights, only to account for high inflation in recent years.”
APD is levied by airlines on passengers who start their journeys at UK airports. The duty is unique to Britain and raises around £3.8bn per year.
The fee is split into three brackets, a reduced charge for economy and increasingly higher charges for business and private jets. The charge for business class is around £13 for domestic flights, £26 for up to 2,000 miles and can reach over £200 for flights longer than 5,500 miles.
The government has often relied on APD to boost government revenue and fund tax cuts, and it was bumped up in the last budget.
However, airlines have lobbied to keep the tax lower, arguing it makes the UK’s aviation sector uncompetitive and reduces passenger numbers.
Responding to the Chancellor’s announcement, Tim Alderslade, chief executive of industry body Airlines UK, said: “The decision to increase APD goes against the Prime Minister’s commitment not to discourage flying through taxation and hitting passengers – including families and those travelling for leisure – with stealthy tax rises will only make the UK even less competitive on the global stage, with aviation taxes and airport charges already amongst the highest in the world.
“The Government should instead focus on supporting the industry’s transition to net zero which the US and EU has made billions of pounds of support available for, unlike here in Britain.”
A spokesperson for Virgin Atlantic said: “The UK Government has failed to acknowledge that by increasing APD, the highest aviation tax in the world, they are penalising families travelling in Premium, as well as business travellers.
“An increase to the standard rate of APD undermines the competitiveness of UK economy, discouraging leisure travellers who have been crucial in aiding the industry’s recovery. UK Government should not underestimate the importance of leisure travel and the adverse impact this will have on hard working Brits, in its rush to raise yet more revenue from the sector.”
The aviation sector previously warned in 2019 that the tax had hurt the UK’s international connectivity and contributed to “a cost base that hampers the ability of UK airlines to open new viable routes.”