- Rachel Reeves is expected to hike APD in her Budget on Wednesday
Tourism pain: Gediminas Ziemelis, the majority shareholder and chair of aviation leasing and services giant Avia Solutions Group says hiking tax will harm the industry
An expected inflation-busting rise in air passenger duty will have ‘far-reaching’ consequences for the wider economy, the chair of a large aviation group has warned.
Chancellor Rachel Reeves is expected to hike charges on passenger air travel in tomorrow’s Budget, with some decrying the move as a ‘holiday tax’.Â
There are reports of surging demand for flight tickets as travellers book now to avoid paying more.
It would follow hike plans announced under the former Tory Government in March this year that would see APD increased from April 2025, piling further pressure on an aviation industry still struggling to regain its pre-pandemic strength.
Gediminas Ziemelis, the majority shareholder and chair of aviation leasing and services giant Avia Solutions Group, told This is Money the move will hurt UK jobs and the country’s tourism industry.
He said: ‘Each aircraft based in the UK directly supports around 400 jobs – four times the number of jobs created when overseas airlines operate routes to the UK.
‘Furthermore, the nation’s airlines bring in around 20 million overseas visitors annually, who collectively spend £14billion, supporting over one million British jobs.
‘Hiking APD risks undermining this vital economic contribution at a time when the aviation sector is still recovering.’
Britain’s aviation sector has criticised reports the Chancellor will hike APD on WednesdayÂ
Britain’s aviation industry has faced demand challenges, labour shortages and rising fuel costs, while a dearth of investment and higher debt costs have also weighed on many smaller airports.
But the UK still has the third largest aviation network in the world, following the US and China, contributing around 3 per cent GDP.
Earlier this month it was revealed that Treasury officials demanded economic performance data from the Department for Transport about the travel industry, assessing the impact of increasing APD and whether the industry can shoulder such rises.
Reports of a looming hike have been badly received, with travel industry group ABTA describing the move as a ‘mistake’.
Ryanair chief executive Michael O’Leary had even urged the Labour Government to axe APD entirely back in September – a move he claimed would help the airline create 1,000 new jobs for UK pilots, cabin crew and engineers by 2030.
He has now threatened to axe hundreds of UK flights in response to a potential hike.
ASG is world’s biggest wet lease operation, with a fleet of 220 aircraft. It entered the UK earlier this year via the acquisition of Acend and currently operates three 737 Max jets.
Ziemelis said an APD hike could mean ‘thinner profit margins’ for low-cost carriers, which my then cut routes leading to ‘decreased connectivity across the UK’.
This, he added, would disprortionately hit smaller regional airports and even weigh on the Government’s climate goals.
Ziemelis said: ‘Raising APD may seem like a quick fix, but the potential damage to the aviation sector, regional economies, and even environmental efforts would outweigh the benefits.
‘The aviation industry plays a vital role in connecting the UK to the world, and its recovery should not be jeopardized by well-intentioned but misapplied policies.’
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