The Government has indicated it may stand firm on keeping airlines’ premium economy class under the higher rate of air passenger duty.
An announcement on the reform of APD is set to be made in The Budget on March 23, but in answers to written questions in the House of Commons, Justine Greening, economy secretary to the Treasury, stopped short of saying the amount of APD levied on premium economy seats was under consideration.
Currently, premium economy sales are classed the same as any non-economy seat, meaning that passengers pay the same amount of APD as they would travelling first class.
In her answer, Greening said seats only qualified for reduced APD if they are the “lowest class of travel” and added twice in her answers: “This criterion applies irrespective of how the seat is marketed.”
Greening said the Government would “explore changes to the aviation tax system” and added that “major changes will be subject to consultation”. However, some believe this means that only one option will be presented to the industry.
Simon Buck, chief executive of the British Air Transport Association, said: “Whether it will be a consultation on one option or on a number we don’t know yet.”
Buck said the tax on premium economy was disproportionate.
“It’s getting to the stage now that these seats are just not sellable any more. They’re just not marketable at that price.”
He added that the UK was potentially losing taxation from the airline industry as customers increasingly learnt to transfer to airports like Amsterdam and Frankfurt to take advantage of cheaper fares in countries where taxes on long-haul flights were less.