Four leading airline chief executives are calling on the UK chancellor, George Osborne to axe Air Passenger Duty arguing that its negative impact on the UK economy is outweighing any benefit from the revenue raised.

In a letter to the Chancellor, Carolyn McCall from easyJet, Willie Walsh from IAG, Michael O’Leary from Ryanair and Steve Ridgway from Virgin Atlantic say that “what is happening in the UK mirrors what occurred in the Netherlands in 2008/09 when a similar air tax was imposed.”

“After a year, the levy was abandoned after a study showed that its harmful effects on the Dutch economy were nearly four times greater than the revenue it produced.”

The letter highlights that passenger numbers at UK airports have fallen consecutively for the last three years to a level lower than 2004. In 2010, there were 7.4 million fewer passengers in the UK while numbers using European airports grew by 66.3 million.

The chief executives have challenged the Chancellor to commission an independent report on the true economic effects of aviation tax in Britain.

“APD was doubled in 2007 and hiked again in each of the last two years. The UK has the highest aviation taxes in the world.”

The letter states that, “For hard-working families, APD is a tax too far for the privilege of taking a well-earned holiday. It is also a tax on tourism and a tax on business.”

“Aviation doesn’t just drive exports – it is a major exporter in its own right with our airlines earning nearly £11 billion of foreign revenues every year. Tourism is one of the UK’s most important earners and is worth £115 billion to the UK economy.”

“We take our responsibility to the environment very seriously and have taken steps to reduce our impact. We support emissions trading (ETS) in principle but a combination of both APD and ETS when it is introduced is unsustainable.”

Separately, a survey carried out by the airlines this week shows that 85 per cent of those asked believe that aviation is important to the recovery of the UK economy and 77 per cent believe that APD is an unfair tax.

Findings from One Poll survey in the UK of 3000 people on 14/5 November 2011

77% say APD is an unfair tax

80% would like APD scrapped (36.9% ‘yes definitely’ and 42.9% ‘yes m aybe’)

85% believe that aviation is important in the recovery of the UK economy (36.9% ‘yes definitely’ and 48% ‘yes maybe’)

Awareness

71% had no idea that yet another APD rise was due in April 2012

78% were not aware that an economy ticket to Florida from the UK could include as much as £70 APD from April 2012

80% were unaware that a family of four could be paying over £60 APD to fly to Spain from the UK

APD background

In the Netherlands, a travel tax was introduced in 2008. Designed to raise £300 million per annum, it actually cost their economy over a billion pounds in the first year and the Dutch government abandoned it. Tax proposals in Denmark were withdrawn for similar reasons.

In Northern Ireland, the Treasury recently accepted that APD was distorting the economy and reduced it by 80 per cent for transatlantic passengers.

Air Passenger Duty was introduced in 1994 as a ‘green tax’ though latterly the Treasury admitted that it is ‘fundamentally a revenue raising duty’. In 2009, passengers paid £1.9 billion in APD. This rose to £2.1 billion in 2010/11 and it is forecast to rise to £3.6 billion by 2015.

In January 2007, APD in economy class was £5 for shorthaul routes and £20 for longhaul. By November 2010, rates had risen to £12 for shorthaul and £60-£85 for longhaul.

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