BA Chief: Air Tax Rise Will Harm Economy

A hike in the departure tax on airline passengers will hit the UK tourism industry and wider economy, the boss of British Airways' parent company has told Sky News.

Airline Passenger Duty (APD) is due to increase from next April and some firms believe it could go up by as much as 10%, following big rises in 2007 and 2010.

Willie Walsh, the chief executive of IAG, which also owns Iberia, said it was wrong to raise APD when airlines were trying to attract business from the rapidly developing economies of India and China.

Speaking to Sky's Dermot Murnaghan, Mr Walsh said he thought Chancellor George Osborne's decision will also put an unfair burden on airlines.

Mr Walsh said it was cheaper instead to fly to France and Germany, and claimed "not a penny" from the levy was spent on the environment.

He told Murnaghan: "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."

Mr Walsh warned Heathrow would soon lose its title as the world's largest airport to Dubai, and did not think a new airport in the Thames estuary, which he said could cost as much as £60bn, was financially viable.

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 £50bn or £60bn, I think is just not a credible proposition."