Tax rises have wrecked hopes of post-Brexit trade boom, says former BA boss

A string of tax rises imposed by Rachel Reeves have undermined Britain’s ability to stoke a post-Brexit boom in trade, aviation chief Willie Walsh has warned.

Mr Walsh, a former British Airways boss, accused ministers of a “schizophrenic” approach that was causing economic damage.

While Labour was quick to talk up its support for aviation on taking office, he said, a different reality had emerged from measures announced by the Chancellor in her first Budget, including an increase in the air passenger duty (APD) departure tax.

Mr Walsh said: “The words have been encouraging, the actions not so encouraging. It’s disappointing to see the measures that have been adopted.

“They have expressed vocal support for the industry, which is positive. But the increase in APD is going to be damaging.”

Mr Walsh said penalties facing the industry, which also include a fivefold increase in business rates for airports, as well as the hike in employers’ National Insurance contributions, will limit the scope for airline growth.

He said that was illogical given that flying is vital for Britain’s post-Brexit place in the world, “particularly with the economies that they’ve been talking about doing trade deals with”.

Mr Walsh said: “In the post-Brexit environment everybody expected the UK to try and deliver as an island nation trading in the world.

“Nothing I’ve seen makes me believe that the UK has moved away from Europe in terms of its thinking when it comes to aviation.

“Certainly it is way, way apart from what we’re seeing in Asia in terms of their ambition and understanding of what needs to happen.”

Mr Walsh – who is chief executive of the International Air Transport Association (Iata), which represents 340 airlines worldwide – said Labour’s approach is closer to that of countries such as the Netherlands, which has capped the number of flights to curb aircraft noise.

He said the step risks destroying the position of Amsterdam Schiphol airport as an international hub and undermining the Dutch economy.

Increasing airport capacity

The Irishman, a former pilot at Aer Lingus, contrasted Britain’s attitude to aviation with pro-industry policies he predicted that Donald Trump would introduce in the US.

Mr Walsh also said he remains sceptical about plans to increase airport capacity in the Southeast. He said that while a second runway is a possibility at Gatwick, as the Government is due to reach a decision on expansion plans in February, there is next to no chance of a third strip ever winning acceptance at Heathrow.

“The cost and the environmental challenge that Heathrow faces are beyond anything that could be achieved. I would rate the prospects at zero percent,” he added.

Mr Walsh added that production of so-called sustainable aviation fuel (SAF) is falling below targeted levels, jeopardising the ability of airlines to cut carbon emissions.

Around 1m metric tons of SAF will be produced this year. While that’s double output in 2023 it is short of the 1.5m tons targeted and accounts for just 0.3% of overall jet fuel demand.

He said oil companies have begun to retreat from making SAF amid mixed messages from governments on the future of oil and gas production.

Iata updated its outlook for airline profits, forecasting the industry will generate net income of $37bn (£29bn) in 2025, up by more than $5bn, as demand for travel continues to increase.

The trade group said margins will remain thin, however, at just $7 per passenger, as competition continues to drive down fares.