Airline Executives Urge UK Chancellor to Reconsider Tax Hikes

Two prominent airline companies, Ryanair and Wizz Air, have voiced strong opposition to potential tax increases in the aviation sector ahead of the UK Budget scheduled for November 26, 2023. Senior officials from both airlines have cautioned that raising the Air Passenger Duty (APD) could result in carriers relocating operations away from the UK.

The UK currently imposes the highest APD in the world, structured in bands that vary based on destination and class of travel. As it stands, airlines are already facing record-high levels of this tax. In light of a projected fiscal shortfall in public finances estimated between £20 billion and £50 billion, Chancellor Rachel Reeves is expected to propose tax hikes and spending cuts in her upcoming Budget.

Eddie Wilson, Chief Executive of Ryanair, has articulated concerns that increased APD rates would compel the airline to reduce its use of new aircraft on UK routes. Speaking to the Financial Times, Wilson noted that Ryanair has already cut some services from Newquay, Cornwall, opting instead to operate in Sweden, where the aviation duty has been eliminated. He remarked, “Airlines are the most mobile investment in the world,” adding that the Treasury does not seem to recognize this flexibility. He emphasized that rising taxes would hinder growth opportunities for the industry.

Similarly, Michael Delehant, Chief Operations Officer at Wizz Air, expressed his apprehensions regarding the UK aviation sector’s future. He warned that the industry risks becoming “very growth stunted” if tax policies become more burdensome. During his discussion with the Financial Times, he highlighted a recent decision to shift aircraft from Vienna, Austria, to Bratislava, Slovakia, due to rising airport costs, underscoring the importance of price sensitivity in the aviation market. “When you’re at the price sensitive part of the chain, you have to and you can’t just accept higher prices,” Delehant stated, using the shift from Vienna as a case study.

The UK Government reviews APD rates annually, and the Office for Budget Responsibility estimates that the tax will generate approximately £4.5 billion for public finances in the fiscal year 2025-26. As discussions continue, both Ryanair and Wizz Air are closely monitoring the Government’s fiscal strategies, with implications for their operational strategies in the region.

The potential changes to APD could significantly impact the UK’s competitive position in the global aviation market, as airlines weigh the costs of operating within the UK against more favorable conditions elsewhere.