Alarm at planned airport tax hikes

Airlines and travel companies have reacted with alarm at reports that the government is planning to double airport tax. But they face strenuous arguments from environment campaigners for the ear of chancellor Gordon Brown.

Tour operators say that even a small rise in air passenger duty will have an impact on the sales of package holidays, which are already "substantially" down for next summer. And low-cost airlines complain that their passengers will be disproportionately affected.

It is understood that the Department of Transport and the Treasury are proposing to raise the duty from £5 to £10 on economy flights within Britain and from Britain to Europe, and from £20 to £40 for other destinations.

Graham Lancaster, a spokesman for the Federation of Tour Operators, which represents the companies selling 80% of package holidays in Britain, said: "We are alarmed by the speculation. The package holiday is highly price elastic and people react immediately to price rises and reductions. Rises on this scale will affect the decisions of a large number of people. And it is the poorest people who will be most affected.

"We made a strong case before last year's budget that the industry was not in a position to face extra taxes. The situation is worse this year with bookings for summer 2004 substantially down. The strong euro has also contributed to higher prices."

Sean Tipton, of the Association of British Travel Agents, said: "Anything that raises costs and influences the intention to travel can lead to job losses in the industry. Every pound raised would be more than off-set by the losses of revenue in spending by visitors to Britain."

A spokesperson for British Airways said: "It is hard to justify another rise in duty when it will serve only to put fares up and provide extra revenue for the Treasury."

The low-cost airlines are particularly angry because the tax forms a much higher proportion of their fares. Across the industry, their one-way fares average around £40 per passenger, which means £10 is a tax of 25%.

Mike Rutter, communications director of FlyBe, which has bases in Birmingham, Bristol, Southampton and Edinburgh, said: "Regional aviation is more and more driven by low-cost airlines while the bigger airlines are pulling out. Raising air passenger duty is punishing the sector that is taking the pressure off the south-east airports."

The speculation over the tax centres on a white paper to be published in December, which may hail the rise as a "green" tax, while proposing new runways in the south-east. Both easyJet and BA highlighted the green issue this week.

EasyJet supported "the principle that the aviation industry should cover its environmental costs", but pointed out that "there was no suggestion that this tax would be ring-fenced for environmental issues".

BA said: "Environmental objectives are much more likely to be met through practical measures. That is why we support emissions trading [a European Commission "auction", where the companies who pay the least in taxes must make the largest cuts in pollution], an approach that creates powerful incentives for reducing greenhouse gas emissions, rather than imposing additional taxes which will not lead directly to an improvement in environmental performance."

Friends of the Earth, the leading environmental campaigner on aviation issues, is scornful of these arguments. Roger Higman, chief aviation campaigner, said: "Aviation is a fast-growing source of the pollution that is causing climate change, which threatens to kill hundreds of millions of people through floods and drought etc. The poorest people in the poorest countries will be most at risk."

On emissions trading, Higman said: "The science on the exact impact of different pollutants in the upper atmosphere is imprecise. The only way to prevent pollution is to discourage flying altogether."