Plans to dramatically increase air passenger duty will hit premium economy and long-haul flights

LONDON - A dramatic rise in air passenger duty has travel operators up in arms.

Plans to dramatically increase air passenger duty will hit premium economy and long-haul flights

British Airways, Virgin Atlantic and Ryanair rarely agree, but government plans to raise the level of air passenger duty (APD) have the entire UK travel industry ready to rally together.

In this year's budget announcement, Chancellor Alistair Darling confirmed plans to hike up APD, first in November this year, and again in November 2010. Today, a family of four will pay £160 in APD to fly premium economy class to Barbados. From November next year, this will leap to £600. Airlines, tour operators and tourism bodies are furious about the plans.

The Association of British Travel Agents (ABTA) is looking to pull the industry together to launch a summer-long campaign to raise awareness of APD and lobby the government to reconsider the 2010 increases. Plans for the activity remain sketchy, but it has been confirmed that heavyweight brands including TUI, Thomas Cook, BA and The Co-operative Travel will provide support.

Sir Richard Branson has confirmed that Virgin Atlantic will also roll out an APD-themed campaign. Information about the amount of duty consumers are required to pay per ticket will appear on the airline's websites and ticket bookings, while Branson is also keen to point out government is not using funds raised through APD toward the development of cleaner energy sources, which it had previously pledged to do.

'APD is not going to help the environment,' says Virgin Atlantic's director of communications, Paul Charles. 'None of the money is going into projects to help climate change. We're looking for the government to either freeze or reduce APD after the raises in November.'

When APD is re-banded, some holiday destinations will suffer more than others. Whether a resort is classed as band B or C depends on whether its capital city is more or less than 4000 miles from the UK. As a result, consumers will have to pay more to travel to the Caribbean than to San Francisco or Hawaii, both of which share the same banding as Egypt.

Carol Hay, the Caribbean Tourism Organisation director of marketing for UK and Europe, says the body will be targeting consumers with its own digital and direct marketing with the aim of establishing banding parity with the US.

'We have to be realistic about what we can achieve, but we want to be able to compete fairly with the US,' says Hay. 'Our aim is to make as many people aware of the situation as we can and create as much hype as possible.'

Furthermore, the fact that banding is divided into 'economy' and 'all other classes' will have a severe impact on premium economy and mid-tier services between economy and business class.

Tim Williamson, customer director at tour operator TUI UK, is convinced that the new banding will 'destroy' premium economy class. He envisages a doomsday scenario where APD-savvy consumers will fly to tax-free European hubs, such as Schiphol, to begin long-haul flights.

Williamson fears that little can be achieved through a consumer campaign, particularly because the Conservative Party supports of APD.

'You need to be careful that you're not flogging a dead horse,' he warns. 'When have campaigns ever made the government change taxation plans?  We will support any campaign, but it will have to be pretty good to have any impact.'

As Caribbean island economies teeter on the brink, and airlines may be forced to top up ticket prices by as much as £170, the government's policy is uniformly unpopular. However, with the UK budget deficit up to £90bn, it is hard to see the Treasury relinquishing such a guaranteed source of revenue.

 

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