Virgin Atlantic CEO Shai Weiss on day two of the Farnborough International Airshow on Tuesday, July 23, 2024 in the United Kingdom.
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LONDON — Virgin Atlantic CEO Shai Weiss said on Monday that the British Labor government’s landmark October budget proposed a “growth tax” as tax rates rise for the aviation industry.
Weiss told the Aviation 2024 conference in London that Labor and the previous Conservative government “did not do enough to recognize aviation as a strategic asset for the UK”
“All we’re seeing is an increase in the airline passenger tax,” Weiss said. Air Passenger Duty (APD) Charged to airlines and aircraft operators on a per-passenger basis, rates vary based on distance traveled and class flown, and are usually (though not always) passed on to customers in the form of airfare fees.
“I call (the budget) a growth tax,” Weiss said on Monday, adding that while it was necessary to cover the UK’s budget deficit, it was also important to recognize the aviation industry’s contribution to the UK’s overall economy.
Under Labor policy, APD short-haul economy fares will rise from £13 to £15 ($18.90) from April 2026, and other class fares from £28 to £32. For journeys between 2,001 and 5,500 miles, APD will rise from £90 to £102 in Economy and from £216 to £244 in other classes.
Regarding the APD interest rate hike, the UK Treasury stated that interest rates will be raised based on inflation measured by the Retail Price Index, and further raised to take into account inflation factors not included in the previous budget. According to Treasury forecasts, the higher APD rate – which also includes the 50% rate paid by private jet passengers – would see annual revenue jump from around £100m to £500m.
Aviation taxes are an increasingly popular source of revenue for governments as they work to meet carbon reduction targets. Industry insiders believe airlines are already struggling with low profits, while higher ticket prices are a drag on the wider economy while also discouraging investment in areas such as sustainable aviation fuel.
UK Transport Secretary Louise Hague will speak at the same event on Monday afternoon.
Labor won its first election victory in 14 years after aggressively courting business over the summer as part of its election campaign and promising regulatory reforms and pro-growth policies. However, many British companies and trade groups reacted negatively to the budget, which contains tax increases totaling 40 billion pounds ($50.2 billion), mainly for businesses.
Finance Minister Rachel Reeves has repeatedly stressed that these measures are necessary to plug the gap in public finances and reduce UK debt.
The head of the Confederation of British Industry told the trade group’s annual conference in London on Monday that businesses were delaying decisions about expansion and investment following the Budget, which was released shortly after Labor announced a raft of labor market reforms.
Rain Newton-Smith said the increase in employer national insurance (income tax) contributions and the measures contained in the Bill Employment Rights Act It caught many people off guard and put a “heavy burden on the business.”
CNBC has contacted the UK Treasury for comment.
Trent questions continue
Virgin Atlantic’s Weiss said on the sidelines of the Aviation 2024 event that “with a little luck” the airline will return to operating profit in 2024 and hit record profits again.
airlines in april report Despite record revenue of 3.1 billion pounds, it still lost 139 million pounds ($175 million) in 2023 and said it expected to return to profitability as pandemic-era difficulties ease. UK-based Virgin Atlantic is 49% owned by American Airlines deltaRichard Branson’s Virgin Group holds a 51% stake.
Weiss also said he was prepared for the Rolls-Royce Trent 1000 engine problem – which has plagued many airlines operating Boeing B787s – to affect Virgin Atlantic’s schedule and financial situation throughout 2025. , noting that things could end up being better or worse.
Engine repairs ground plane Virgin Atlantic flights postponed Routes to Accra and resumption of services to Tel Aviv until winter 2025-2026.
Weiss added that he expected Virgin Atlantic’s pricing to be “relatively stable” next year, despite Trent 1000 issues and wider industry supply chain issues reducing overall passenger capacity.
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