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- Rachel Reeves expected to increase APD in her budget on Wednesday
Tourism pain: Gediminas Ziemelis, majority shareholder and chairman of aviation leasing and services giant Avia Solutions Group, says raising taxes will hurt the industry
An expected rise in air passenger charges that will reduce inflation 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 passenger air travel fares in tomorrow’s Budget, with some denouncing the move as a “holiday tax”.
There are reports of rising demand for airline tickets as travelers book now to avoid paying more.
It would follow increase plans announced during the previous Conservative government in March this year, which would increase APD from April 2025, increasing pressure on an aviation industry still struggling to regain its pre-pandemic strength .
Gediminas Ziemelis, majority shareholder and chairman 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 UK-based aircraft directly generates around 400 jobs, four times the number of jobs created when foreign airlines operate routes to the UK.
‘In addition, the country’s airlines attract around 20 million overseas visitors annually, who together spend £14 billion, supporting more than one million British jobs.
“Increasing the APD risks undermining this vital economic contribution at a time when the aviation sector is still recovering.”
The British aviation sector has criticized reports that the chancellor will increase APD on Wednesday.
The British aviation industry has faced demand challenges, labor shortages and rising fuel costs, while investment shortages and higher debt costs have also weighed on many smaller airports.
But the UK still has the world’s third-largest aviation network, after the United States and China, and contributes around 3 per cent of GDP.
Earlier this month it was revealed that Treasury officials demanded data from the Department for Transport on the economic performance of the travel industry, assessing the impact of the APD increase and whether the industry can withstand such increases.
Reports of an imminent increase have been poorly received, with travel industry group ABTA describing the move as a “mistake”.
Ryanair chief executive Michael O’Leary had even urged the Labor government to completely scrap APD in September, a move he claimed would help the airline create 1,000 new jobs for pilots, cabin crew and UK engineers by 2030.
It has now threatened to scrap hundreds of UK flights in response to a potential surge.
ASG is the world’s largest wet leasing operation, with a fleet of 220 aircraft. It entered the UK earlier this year through the acquisition of Acend and currently operates three 737 Max aircraft.
Ziemelis said an increase in APD could mean “tighter profit margins” for low-cost airlines, which could then cut routes, leading to a “decrease in connectivity across the UK”.
This, he added, would disproportionately affect smaller regional airports and even impact the Government’s climate targets.
Ziemelis said: ‘Increasing APD may seem like a quick fix, but the potential harm 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 threatened by well-intentioned but poorly implemented policies.”
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