- Rachel Reeves is expected to increase APD in her budget on Wednesday
Tourism pain: Gediminas Ziemelis, the majority shareholder and chairman of aviation leasing and services giant Avia Solutions Group, says the tax hike will hurt the sector
An expected inflation-busting increase in passenger fares will have “far-reaching” consequences for the wider economy, the chairman of a major aviation group has warned.
Chancellor Rachel Reeves is expected to increase air travel fares for passengers in tomorrow’s Budget, with some dismissing the measure as a ‘holiday tax’.
There are reports of rising demand for airline tickets as travelers book now to avoid paying more.
It would follow on from plans announced by the former Tory government in March this year which would see the APD increased from April 2025, increasing pressure on an aviation industry still struggling to maintain its regain pre-pandemic strength.
Gediminas Ziemelis, the majority shareholder and chairman of aviation leasing and services giant Avia Solutions Group, told This is Money that the move will damage British jobs and the country’s tourism sector.
He said: ‘Each aircraft based in Britain directly supports around 400 jobs – four times the number of jobs created when overseas airlines operate routes to Britain.
‘In addition, the country’s airlines attract around 20 million foreign visitors every year, who collectively spend £14 billion, supporting more than a million British jobs.
“Increasing the APD risks undermining this crucial economic contribution at a time when the aviation sector is still recovering.”
The UK aviation sector has criticized reports that the Chancellor will increase the APD on Wednesday
The UK aviation industry has faced demand issues, labor shortages and rising fuel costs, while a lack of investment and higher debt levels have also weighed on many smaller airports.
But Britain still has the third largest aviation network in the world, after the US and China, and contributes around 3 percent to GDP.
Earlier this month, it was revealed that Treasury officials requested economic performance data from the Department of Transport on the travel industry, assessing the impact of rising APD and whether the sector can cope with such increases.
Reports of an impending increase have been poorly received, with travel industry group ABTA describing the measure as a ‘mistake’.
Ryanair CEO Michael O’Leary had even urged the Labor government in September to abolish APD completely – a move he said would help the airline create 1,000 new jobs for British pilots, cabin crew and engineers.
He has now threatened to cancel hundreds of UK flights in response to a possible increase.
ASG is the world’s largest wet-leasing company, with a fleet of 220 aircraft. It entered the UK earlier this year through its acquisition of Acend and currently operates three 737 Max jets.
Ziemelis said an increase in APD could mean “smaller profit margins” for low-cost airlines, shortening my routes, leading to “reduced connectivity in the UK”.
He added that this would disproportionately affect smaller regional airports and even weigh on the government’s climate targets.
Ziemelis said: ‘Increasing the 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 Britain to the world, and its recovery should not be jeopardized by well-intentioned but misapplied policies.’
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