Shai Weiss, chief executive officer of Virgin Atlantic Airways Ltd., on day two of the Farnborough International Airshow in Farnborough, UK, on Tuesday, July 23, 2024.
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LONDON – Virgin Atlantic CEO Shai Weiss on Monday said the U.K. Labour government’s landmark October budget presented a “tax on growth” due to higher rates placed on the aviation industry.
Weiss said during the Airlines 2024 conference in London that both Labour and the previous Conservative administration had “not done enough to recognize aviation as a strategic asset” for the U.K.
“All we’ve seen is an increase on Air Passenger Duty,” Weiss said. Air Passenger Duty (APD) is levied on airlines and aircraft operators on a per-passenger basis, with rates differing by distance traveled and the cabin class traveled in, and is generally – though not always – passed on to customers in ticket costs.
“I would call [the Budget] a tax on growth,” Weiss said Monday, adding that while it was necessary to cover Britain’s budget deficit, it was also important to recognize the contribution of aviation to the wider U.K. economy.
Under Labour policy, APD will increase on short-haul economy class tickets to £15 ($18.90) from £13 from April 2026, with the rate on other cabin classes rising to £32 from £28. For journeys between 2,001 and 5,500 miles, APD will rise to £102 from £90 in economy and to £244 from £216 in other classes.
Regarding the APD hike, the U.K. Treasury says rates would increase by the rate of inflation measured in the Retail Price Index, with a further increase to account for inflation not incorporated into previous budgets. According to Treasury forecasts, the higher rate of APD – which also includes a 50% rate in the amount paid on private jet passengers – will see revenue generation jump from approximately £100 million to £500 million annually.
Aviation taxes are a increasingly popular revenue-raiser for governments which are broadly also trying to meet carbon emission reduction targets. The industry argues that airlines are already struggling with low margins and that higher air fares drag on the wider economy while also holding back investment in areas such as sustainable jet fuels.
U.K. Transport Minister Louise Haigh will speak at the same event on Monday afternoon.
Labour heavily courted businesses as part of the campaign that delivered its first electoral victory for 14 years in the summer, promising regulatory reform and pro-growth policies. However, many British corporations and trade groups have reacted negatively to the budget, which contained a total £40 billion ($50.2 billion) in tax hikes heavily oriented toward businesses.
Finance Minister Rachel Reeves has repeatedly stressed that the measures were necessary to plug a shortfall in public finances and move toward reducing U.K. debt.
The head of the Confederation of British Industry on Monday said during the trade group’s annual conference in London that businesses were putting off decisions on expansion and investment in the wake of the budget, which came shortly after Labour announced a slew of labor market reforms.
Rain Newton-Smith said the rise in employer National Insurance (a tax on earnings) contributions and the measures contained in the Employment Rights Bill had caught many off-guard and had put a “heavy burden on business.”
CNBC has contacted the U.K. Treasury for comment.
Trent issues to continue
Virgin Atlantic’s Weiss said during Airlines 2024 that “with a bit of luck” the carrier was heading for a return to operating profit and another year of record profit in 2024.
The airline in April reported a £139 million ($175 million) loss in 2023 despite record revenue of £3.1 billion, and said it expected a return to profitability as its pandemic-era difficulties eased. U.K.-based Virgin Atlantic is 49% owned by U.S. carrier Delta, and 51% owned by Richard Branson’s Virgin Group.
Weiss also said he was prepared for Rolls-Royce Trent 1000 engine issues — which are plaguing many carriers which fly Boeing’s B787 — to impact Virgin Atlantic’s scheduling and finances through the whole of 2025, noting the situation could end up being better or worse than that.
Repairs to the engines have taken the aircraft out of service, delaying Virgin Atlantic’s launch of flights to Accra and resumption of its Tel Aviv route until winter 2025-2026.
Weiss added that despite the Trent 1000 issues and broader industry supply chain issues decreasing overall passenger capacity, he anticipated Virgin Atlantic pricing being “relatively stable” into next year.
