Air tax rise will make family holidays 'unaffordable'

Next week's rise in the Air Passenger Duty (APD) airport departure tax will make family holidays "unaffordable for many", Sir Richard Branson's airline Virgin Atlantic warned today.

APD rates increase on Monday, with those taking trips to the Caribbean being particularly badly hit.

Those flying economy class to the Caribbean from next week will each pay £75 in APD - a 50% hike on the previous rate.

For APD purposes, the Caribbean has been put in Band C which means that passengers will be paying more to fly, for example, to Barbados which is only an eight-hour trip, than to Los Angeles which is a near-12 hour flight.

This is because the whole of the USA has been put in Band B where APD rates are slightly lower.

Virgin said today that a family of four holidaying in Florida from next week would be paying a total of £240 in APD.

Also, a retired couple visiting grandchildren in Australia, for example, and flying in premium economy class would, from Monday, pay £170 each - the highest APD rate.

Virgin Atlantic's chief commercial officer Julie Southern said: "Holidays are an essential part of our lives and are valued even more in these difficult economic times.

"With passengers now being asked to pay up to 10 times more tax since APD's introduction, the annual family holiday will become unaffordable for many."

She went on: "Given the forecasted rises in APD over the next five years, all travellers will be more than paying their fair share and in fact contributing more to the Treasury than the banks via the new banking levy.

"Our message to Government is that this absolutely has to be the last time that the travelling public faces APD rises."

A Virgin Atlantic survey of 2,000 long-haul flyers showed that due to the APD rises, 56% of holidaymakers believed they may have to cut the number of stays away while 58% would consider taking less holiday money to spend.

Also, only 44% of those polled were aware of next week's changes.

Caribbean tourist chiefs are outraged at the APD rise, while British Airways chief executive Willie Walsh has called the tax "a disgrace".

Travel organisation Abta and other travel industry bodies have continued lobbying ministers to protest at the new APD rates.

The Government is considering replacing APD with a per-plane tax, but not all the travel industry are happy with the alternative plan.

APD is automatically added to the price of an air ticket when it is booked.

Phil Salcedo, publisher at Travelzoo UK, which does not sell holidays but publishes details of the best deals, said: "Around 30% of the travel deals that we check simply don't include taxes in the price.

"This means that, with this new increase in tax, travellers need to be extra wary and make sure the price they expect to pay doesn't massively increase when they get to a page of taxes."

He added that the banding arrangement for the new APD rates was "provoking strong feeling in the travel industry".

It is possible to fly as far as Hawaii and pay less for APD than for a trip to the Caribbean. Also, Turkey falls into Band A, while Egypt is classed as Band B. This means a family of four travelling in economy class to Turkey will pay £48 APD in comparison to £240 in APD for the same family to travel to Egypt.

Bob Atkinson, of http://www.travelsupermarket.com, said: "The tax bands aren't consistent. APD is a flat tax and is therefore regressive. The tax should apply to the actual mileage or as a percentage of the total paid.

"There needs to be a complete revamp of the APD scheme. It should be replaced by a per plane tax so that we can then see the environmental efficiency of each airline and their aircraft, which would be far more responsible and help customers to choose between airlines."

Gareth Williams, chief executive of flight comparison site Skyscanner.net, said: "The tax hike could certainly lead to travellers considering flying long haul from European hubs in an effort to save money.

"In a recent survey we found that more than three-quarters of our users would be willing to fly indirectly to save money. Obviously if this does prove to be the case it could have serious repercussions for the long-haul UK aviation industry."

This is what passengers will have to pay for APD from November 1 2010, with the percentage increase on the rates introduced in November last year. Premium relates to prices for those travelling in premium economy, business class and and first class seats.

BAND A (0-2,000 miles from London) ECONOMY PREMIUM INCREASE

(inc. Europe) £11 £22 9%

BAND B (2,001-4,000 miles)

(inc. Egypt and USA) £60 £120 33%

BAND C (4,001-6000 miles from London) £75 £150 50%

(inc. Caribbean and South Africa)

BAND D (more than 6,000) £85 £170 55%

(inc. Australia and Singapore)

Budget airline easyJet called for the APD to change from a per person to a per plane tax.

Chief executive Carolyn McCall said: "The Government should reform Air Passenger Duty to make it fairer for the public and to encourage greener behaviour by airlines.

"APD is already higher in the UK than anywhere else in Europe and UK passengers and the environment would be better off if the tax was shifted from per person to a per plane tax."

Asked whether the airlines would be prepared to take on the tax burden, Mr Walsh told Sky News: "No. We can't afford to take on the tax burden. We're talking about paying almost £450 million on an annual basis to the Exchequer through this tax.

"That's £450 million that British Airways does not have. I don't believe easyJet has the money to pay this tax and take it on.

"These are very significant tax burdens that need to be addressed by the Government if we are to contribute to the economic recovery that everybody wants to see."

Manny Fontenla-Novoa, chief executive of travel company Thomas Cook Group, said: "We have strenuously voiced, and will continue to do so, our disappointment to the Government that is has continued with its plans to increase APD.

"In either in its current form of a per-passenger duty, or the per-aircraft option being discussed by the coalition Government, there is no evidence of this tax having any environmental benefit and we will continue to lobby on behalf of our holidaymakers."

Thomas Cook has, for a period, introduced "beat the taxman" special deals on long-haul flights.

Mr Fontenla-Novoa added: "It's ridiculous to think that holidaymakers travelling in premium seats on one of our long haul charter flights will have to pay the same APD fee as those flying in first class on a scheduled flight - so we've removed this cost from their holidays."

A survey by London-based trade exhibition World Travel Market (WTM) showed that 37% of the 1,000 people polled, all of whom holidayed this summer, would reduce their overseas flying due to the APD rise.

A further 8% said they would not fly at all because of the tax hike.

Also, 41% would reduce their overseas holidays under the per-plane tax being considered by the Government, with 10% stopping foreign holidays altogether.

In a separate WTM poll, more than 40% of 1,200 travel industry senior executives polled said increased taxation - particularly APD - was a major negative issue for the industry over the next five years.

WTM chairman Fiona Jeffery said: "A further increase in APD could be a real concern to the travel and tourism industry. APD was doubled in 2007 and is now double the 2007 figure leading to the cost of flying abroad increasing.

"Our surveys show both holidaymakers and the industry are significantly concerned by both next week's increase in APD and the proposed switch to a per-plane tax."

Colin Matthews, chief executive of airport operator BAA, said: "While we must all play our part in the recovery, we need sensible tax policy that doesn't stunt growth and damage our competitiveness as this does.

"Ultimately, increasing APD will hurt consumers and businesses alike as it makes it more expensive to fly from the UK compared with other countries.

"The knock-on effects of this will be long-standing and bigger, more environmentally-efficient jets will not be able to fly from our airports if passengers decide they can only afford to fly long-haul from our European neighbours instead."

Wolfgang Prock Schauer, chief executive of airline bmi, said: "We are extremely disappointed that the Government has chosen to increase tax on air travellers at a time when we should be encouraging people to travel.

"UK businesses and leisure travellers depend on good connectivity on shorter and longer routes. This tax increase will seriously disadvantage air travellers departing from the UK."

Mark Tanzer, chief executive of travel organisation Abta, said: "For too long our customers have been taken advantage of with successive governments seeing flying as a convenient cash cow.

"These latest huge increases in APD will disproportionately affect families on tight budgets when they are under considerable financial pressure. Increasing taxes will make taking holidays and visiting friends and relatives unaffordable for many.

"Not only is this tax increase pricing people out of taking holidays it also is putting the UK at a clear competitive disadvantage when compared to our European competitors."

Mr Tanzer called on holidaymakers "to make their views known to their MP and stop further increases in this flying poll tax".