Air tax hike 'will harm economy', says Willie Walsh

A hike in a departure tax on airline passengers will hit the UK tourism industry and wider economy, the chief executive of British Airways' parent company said today.

Willie Walsh, the boss of IAG which also owns Iberia, said that it was wrong to increase Air Passenger Duty (APD) when airlines were trying to attract business from the rapidly developing economies of India and China.

It was cheaper instead to fly to France and Germany, he said, and he claimed that "not a penny" from the levy was spent on the environment.

Mr Walsh also said he did not think a new airport in the Thames estuary was financially viable as he warned that Heathrow would soon lose its title as the world's largest airport to Dubai.

Speaking to Dermot Murnaghan on Sky News, Mr Walsh said he thought Chancellor George Osborne's decision to increase APD from next April will put an unfair burden on airlines.

This follows big rises in APD in 2007 and 2010, and some airlines believe the increase could be as much as 10%.

Mr Walsh added: "The first thing to remember is that it is not a green tax. The Government has made that clear. This has nothing to do with the environment. Not a penny of this tax goes to environmental issues.

"Why I believe this is damaging is that it is making the UK uncompetitive. It's making it expensive to do business here, it is deterring tourists from coming to the UK, it is deterring business people from coming to the UK.

"That's the message I get when I travel around the world. When I go to India and China, two of the big economies that we want to attract in to the UK, they are telling me that the UK is becoming too expensive.

"They highlight this tax as one of the reasons they believe they can do business better elsewhere."

Asked about a new airport in the Thames estuary, he said the project could cost as much as £60 billion.

He added: "Financially, I just don't see how it is going to be funded. What people sometimes don't understand is that all airport development in the UK is funded by the airlines and the airports. They are not funded by the taxpayer.

"To get this new airport you are going to have to get some private investment. To find someone in the current environment to put up £50 or £60 billion, I think is just not a credible proposition."

PA