May 13, 2010 / 3:19 PM / 10 years ago

BA and Virgin oppose UK govt air tax reforms

LONODN, May 13 (Reuters) - British Airways BAY.L and Virgin Atlantic [VA.UL] said plans by the UK’s new coalition government for a new plane tax were unworkable and could financially disadvantage Britain’s travel industry. Britain’s Conservative and Liberal Democrat coalition said it would scrap the existing Air Passenger Duty (APD) and replace it with a per-plane tax, saying the move would discourage airlines from flying half-empty planes.

However, BA said the best way to address airlines’ affect on climate change is through the EU emissions trading scheme (ETS), which is due to start in 2012.

“The existing APD is not used to fund environmental or infrastructure benefits and there is no guarantee that a flight-based tax would,” a BA spokesman said.

“Increased taxation on the UK aviation industry will create a financial incentive for customers to fly via continental (European) hubs rather than direct from or transiting through UK airports, which could actually lead to higher emissions as well as financially disadvantage the UK travel industry.”

Under the ETS, each airline gets a certain number of free certificates, or licenses to pollute the air, beyond which they have to pay for certificates.

Analysts say the new duty could tempt airlines which regularly fail to fill planes to cut flights to avoid paying the tax on some unprofitable routes.

A Virgin Atlantic spokeswoman said the new scheme would be unworkable and there was “considerable scope to improve APD but a per plane tax won’t do it.”

However, low-cost airlines, which typically carry more passengers per plane than carriers with global networks such as BA and Virgin, say a per plane tax was a fairer duty,

“APD taxes full planes but not empty ones. It’s now time to act and make APD a fairer and greener tax without increasing the tax burden on the flying public,” said easyJet (EZJ.L) Chief Executive Andy Harrison.

Europe’s biggest travel firm TUI Travel TT.L also backed the change, saying it would “incentivise carbon efficient behaviour”. (Reporting by Rhys Jones; Editing by David Holmes)

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