The Air Passenger Duty (APD) airport departure tax is resulting in long-haul flight passengers subsidising short-haul travel by £222 million a year, Virgin Atlantic Airways said today.
The airline said that in the last four years APD rates had risen by 20% on short-haul travel.
During the same period, the rates on long-haul travel had increased by at least 50%, Virgin said.
The carrier said that had the tax gone up at the same rate, short-haul flights would collectively be contributing at least £222 million more a year, but instead the difference had been made up by travellers flying further afield.
The current lowest rate of APD is £12 for a passenger travelling economy class on a short-haul flight.
APD rates go as high as £170 for a passenger travelling long-haul to, say, Australia, in business class or in first-class.
Virgin is proposing a new £20 rate of APD for short-haul journeys "to redress this disparity".
The airline said this could bring in nearly £650 million to the Treasury, and allow the Government to reduce rates for holidaymakers and business travellers who are already paying more than their fair share.
Virgin Atlantic chief commercial officer Julie Southern said: "APD has rocketed in recent years and with a family of four potentially facing a £260 tax bill to fly to Orlando (in Florida), steps need to be taken to bring this back under control."
Virgin said that an analysis it had made of passenger flights to European destinations easily reached by train showed that the APD rate on short-haul flights was not deterring people from making trips by air.
Ms Southern said: "APD is clearly not supporting the Government's environmental objectives.
"If this suffocating tax is going to stay and even be raised higher in the coming years, it must be fairer and drive the right behaviours from business and consumers."