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Last Updated: Saturday, 16 December 2006, 12:39 GMT
Millions face air tax uncertainty
By Chris A'Court
BBC Radio 4's Money Box

An aeroplane
The extra tax has been designed to help protect the environment
Millions of people who have already booked flights and holidays for next year may have to pay more tax.

In his pre-Budget Report, the chancellor said Air Passenger Duty will double from 1 February.

The extra tax is already loaded onto most fares and holidays that have been booked since 6 December.

But many people who booked earlier for travel after 1 February do not yet know if they will pay extra or if airlines and tour firms will absorb the cost.

The rise will mean for example that tax on a short-haul flight in Europe moves up to 10 per passenger and up to 80 per passenger on long haul business flights.

Families who have already booked next year's package holiday should escape having to pay more according to David Alexander of ABTA which represents travel agents and tour firms.

Speaking to BBC Radio 4's Money Box he said that under the government's package travel regulations "the tour operator will have to absorb 2% of the holiday cost before it can actually surcharge anyone.

"So for example, on a 400 package, which is roughly the industry average, 2% is 8 and mostly air passenger duty increase will be 5. So [tour] operators will not be able to pass on this increase".

Mr Alexander calculates the package holiday industry will lose around 40m as over 4m holiday packages have already been booked when tax was at the lower rate but on which extra tax is now due.

Flights only

People who have bought just flight tickets face a different situation and are likely to be asked to pay extra.

Most airlines are still investigating how they might make passengers pay up or even if they have the legal right to demand extra money.

We have not ruled out the idea of putting on our Gordon Brown costumes and collecting with a bucket
Toby Nichol, Easyjet

Toby Nichol of Easyjet says the airline faces an extra 4.5m tax bill if passengers are not prepared to pay up but making them do so could be difficult.

He hopes passengers will be prepared to pay an extra 5 to cover the tax as a goodwill gesture.

"We will be going back to our customers and saying - the chancellor has doubled air passenger duty - how do you feel about giving us an extra fiver?" he said.

And he added: "We still have not ruled out the idea of putting on our Gordon Brown costumes and walking up and down the aisle on 1 February collecting with a bucket."

So far only one airline, British Airways, has said it will definitely not try to pass the increased tax onto passengers who pre-booked before the chancellor's announcement.

The cost to the business will be 11m.

Virgin Atlantic said it was still deciding whether or how to collect the extra tax.

Ryanair said it still intends to challenge the tax rise but would not give any more details about its intentions.

Monarch Airlines told us it has 180,000 passengers pre-booked for travel after 1 February.

It also has not yet made a decision on whether or how to collect the extra tax now owing.

BBC Radio 4's Money Box was broadcast on Saturday, 16 December at 1204 GMT and Sunday, 17 December at 2102 GMT.

SEE ALSO
Air tax hike 'would hit poorest'
07 Aug 06 |  UK Politics

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