November 25, 2008

The U.K.'s air passenger duty for coach travelers flying from the United States will increase from 40 to 45 British pounds (from about $60 to $68) late next year, according to a pre-budget report by Her Majesty's Revenue and Customs (HMRC), the U.K.'s tax collector.

Premium-class passengers will be hit with a 10-unit increase, from 80 to 90 pounds (from about $121 to $136).

The tax hike would be effective for travel beginning on or after Nov. 1, 2009.

HMRC proposes even larger increases for the following year -- a 60-pound charge for transatlantic coach travelers and 120 for passengers in premium classes.

HMRC is proposing head tax increases on flights from all other world regions, as well. Unlike previous years, the 2009-10 air passenger duty will have four tax brackets. Passengers traveling longer distances will pay more. The plan is being touted as environmentally responsible.

The travel industry lambasted the tax hike.

James May of the Air Transport Association (ATA), a trade group representing U.S. airlines, called the measure "a revenue raiser for the government under the guise of environmental protection."

Further, the ATA claims the tax hike is illegal. "Among other things, the duty improperly asserts regulatory jurisdiction over flights far outside U.K. airspace by taxing flights according to various distance bands arbitrarily set by the U.K. government," said the association.

Ryanair said that the air passenger duty has been billed as an environmental tax since it was introduced in the mid-1990s, but that "not one penny of the tax has done anything to address environmental issues."

"The tax fails to reward airlines, such as Ryanair, which invest in brand-new aircraft and operate younger, cleaner, more environmentally friendly aircraft," the low-cost carrier added.

The Association of British Travel Agents (ABTA) complained that the tax hike penalizes airlines that operate full aircraft, but is more concerned about a negative effect on demand.

"ABTA is particularly concerned that the increase will put off travelers to destinations such as the Caribbean and Kenya, whose economies are extremely dependent upon tourism, particularly from the U.K.," ABTA said. "ABTA believes that the charges being introduced in 2010 will be particularly onerous for those destinations, many of which are recognized as economies in need of significant financial support."