Written evidence submitted by Airlines for America

Re: Airlines for America submission to the Culture, Media and Sport Committee’s inquiry on tourism: Enhancing the Competitiveness of UK Tourism through Aviation Tax Reform

Airlines for America (A4A) is the industry trade organization for the leading U.S. airlines, both passenger and cargo.[1] Our members have significant operations to and from the UK every day and have longstanding relationships with all major British carriers that serve the transatlantic, the world’s most important aviation market.

Given the importance of trade, tourism and investment between the UK and North America, A4A welcomes the opportunity to respond to the Culture, Media and Sport Committee’s inquiry on the future of UK tourism. We remain available to discuss these issues further.

Executive summary

Aviation is fundamental to the UK’s tourism sector, enabling international travel and connecting the UK to global visitor markets. As the Government seeks to grow inbound tourism to 50 million visitors a year by 2030, maintaining strong and competitive air connectivity will be critical.

The UK’s Air Passenger Duty (APD) is a key barrier. APD has increased steadily over recent years and is now among the highest aviation taxes globally. While the impact of individual increases may be incremental, over time they raise the cost of travel, gradually eroding the UK’s competitiveness relative to other destinations. This reduces demand at the margin, weakens connectivity, and constrains the aviation sector’s ability to support tourism growth.

The UK is already forecast to experience slower growth in international tourism than comparable European destinations, particularly from high-value long-haul markets like North America.[2] [3] At the same time, competitor countries are reducing or abolishing aviation taxes.

To support the growth and long-term resilience of UK tourism, a more competitive fiscal policy framework is needed. The UK Government should freeze APD rates, review the structure of the tax and commit to reforming it when fiscal conditions allow.

The role of aviation in supporting UK tourism and economy growth

Aviation plays a central role in supporting the UK’s tourism sector by enabling international travel and connecting the UK to global visitor markets. As an island nation, the UK relies on strong air links to attract inbound tourists, strengthening its position as a global hub for tourism, while sustaining activity across the wider economy, including hospitality, retail and transport.

As the UK Government seeks to grow inbound tourism to 50 million visitors a year by 2030, maintaining and enhancing international connectivity will be critical. However, this depends on ensuring that the UK remains a competitive destination for airlines and passengers alike.

How Air Passenger Duty affects tourism, connectivity and economic growth

APD is a tax levied on passengers departing UK airports, with rates varying by distance band and class of travel. Historically, APD has been indexed to inflation on an annual basis.

Figure 1. APD rates per passenger for flights starting in the UK

As a result of successive increases to the rates of APD, the UK now has among the highest air departure taxes in the world, with direct implications for inbound tourism.

In recent Budgets, the Government has introduced further increases to APD rates beyond standard indexation. For example, in Spring 2025, the Government increased rates for 2025-26, including an above-inflation increase to the standard and higher rates of APD. In Autumn 2024, rates increased again, at a rate far higher than RPI.

This upwards trend risks further increasing the cost of travel. A study by WPI Strategy commissioned by Airlines UK, AirportsUK and Airlines for America suggests that, if APD were to continue to rise at the average rate of the past five years, it would add £30 to long-haul economy fares by 2031.[4]

ADP directly affects the cost of air travel to and from the UK by increasing ticket prices. Higher costs reduce demand for air travel, particularly among price-sensitive leisure travelers in all cabins, making the UK less attractive as a destination relative to competing markets. This includes a segment of leisure travelers flying in premium economy and business class, whose travel decisions are often discretionary and therefore particularly sensitive to changes in overall ticket prices.

This translates into lower visitor numbers and reduced spending across the visitor economy. These demand-side effects are felt across the supply chain and are particularly significant for regional economies that rely on international visitors.

APD also affects the supply-side of the aviation market by influencing the viability of air routes. Airlines operate in a highly competitive environment and make decisions about where to allocate capacity based on expected demand and operating conditions. Higher taxes can reduce the commercial attractiveness of routes, leading to weaker connectivity.

Oxford Economics modelling of the 2025-26 increases to APD illustrates the scale of these impacts on UK-North America connectivity. Compared to a baseline scenario where APD rates remained unchanged, the introduction of higher rates from April 1, 2025 was estimated to reduce passenger flows on these routes by 0.9% by 2030.[5] The associated impacts are illustrated in Figure 2 below.

Figure 2. Impact of 2025-26 changes to APD on UK-North America travel and connectivity and associated economic effects[6]

Oxford Economics estimated that further increases to APD would amplify these effects, while reductions in the tax could stimulate demand and connectivity, supporting higher levels of economic activity and tax receipts over the medium-term. 

These findings demonstrate that APD is not simply a revenue-raising measure, but a policy lever with direct consequences for tourism demand, connectivity and economic growth.

Air Passenger Duty as a barrier to international competitiveness

The UK’s current approach to aviation taxation is a key factor undermining its international competitiveness. APD places a significant additional cost on passengers travelling from UK airports. This increases ticket prices, dampens demand, and affects the commercial viability of routes.

Comparative analysis shows that the UK has the highest aviation taxes among its peer group, contributing to a broader cost disadvantage relative to other major aviation markets.[7] While the UK retains significant strengths, such as strong air connectivity and a highly skilled workforce, these are increasingly offset by a high cost base driven in part by taxation.

The UK remains a highly attractive global tourism destination, welcoming 41.6 million overnight inbound visitors in 2024, including over 6 million from North America. However, findings from Oxford Economics suggest that the UK is losing ground relative to international competitors.

Looking ahead, tourism visits to the UK are projected to grow by an average of 2.2% per year to 2035, representing the slowest rate of growth among major European benchmark destinations over the same period.[8]

This trend is particularly pronounced in the North American market, where growth in arrivals is expected to average just 1.3% annually over this period.[9] This is significantly below rates projected for competing European destinations.

Figure 3. Long-term forecast growth in tourist visits to the UK vs European benchmarks, 2025-2035 [10]

While the UK is expected to remain one of the most popular destinations in Europe in North American visitor volumes, this relative underperformance suggests that the UK is becoming less competitive in attracting international visitors from long-haul markets. By increasing the cost of travel for price-sensitive travelers across all cabins, APD is likely to be an important contributing factor to this trend.

Importantly, the UK is moving in the opposite direction to many of its competitors. Countries such as Sweden have recently abolished aviation taxes, while Ireland has maintained a zero rate since 2014 and Germany has scheduled a decrease in taxes to begin this summer.[11] [12] [13] These policy decisions reflect a recognition that aviation taxes act as a constraint on demand, connectivity and economic growth.

The experience of these countries illustrates the impact of tax policy on aviation performance. In Ireland, the effective removal of air travel tax was followed by significant and immediate increases in passenger numbers. By 2015, passenger numbers increased by 3.3 million to 29.8 million. These numbers continued to grow over the next decade, reaching 41 million in 2024.[14]

In Sweden, the introduction of an aviation tax coincided with a decline in passenger demand and a slower recovery in traffic compared to neighboring countries. Airport operator Swedavia attributed this to several factors, including the introduction of the national Aviation Tax.[15] This prompted the Swedish Government to abolish the tax to restore competitiveness. Germany has also taken action to boost the air travel industry, which had seen slower post-pandemic recovery compared to other European nations.

This international context highlights the extent to which the UK’s current policy risks placing it at a structural disadvantage in attracting visitors.

Disproportionate impact on high-value long-haul tourism

APD has a particularly significant impact on long-haul passengers, who are critical to the UK’s tourism economy. These visitors represent one of the UK’s most valuable inbound markets, typically staying longer and spending more per visit and per day of their visit compared to short-haul visitors.

In 2024, North American visitors spent approximately £1,430 per visit compared to £660 for European visitors, and £212 per day compared to £134.[16] They also stayed longer, with the average visit lasting 6.75 nights compared to 5 nights for European visitors.

Despite this, long-haul passengers face significantly higher levels of APD than short-haul visitors. North American visitors fall within Destination Band B, meaning that a family of four flying in economy class from London to New York will pay £402 in APD alone. From April 1, 2027, this cost will rise to more than £420.

For these visitors, APD acts as a fixed entry cost, regardless of the purpose or value of their trip. Unlike short-haul passengers, they have no alternative mode of transport, making them particularly sensitive to changes in the cost of air travel.

This creates a structural imbalance in the UK’s tourism strategy. The tax system places the greatest burden on visitors who contribute disproportionately to the UK economy, risking a gradual erosion of demand over time.

Since APD was introduced in 1994, the long-haul rate has increased substantially compared with the short-haul rate:

• In 1994, the long-haul rate was about twice the short-haul rate.
• Today, it is about seven times higher.

Given the clear economic value that long-haul passengers bring to the UK, the Government should seriously consider narrowing the gap between short- and long-haul rates.

Conclusion and recommendations

The UK has a strong foundation as a global tourism destination, supported by world-class cultural assets and extensive international connectivity. However, maintaining and enhancing this position, particularly in comparison with European counterparts, will require a policy framework that supports growth and competitiveness.

Current levels of APD risk undermining these objectives by increasing costs, reducing demand and weakening connectivity over time, particularly in high-value long-haul markets.

Reforming APD presents a clear opportunity to strengthen the UK’s international competitiveness, support the long-term growth of the tourism sector, and maximize the economic benefits of aviation.

Recommendations:

●        Freeze APD rates to prevent further increases in travel costs

●        Review the structure of APD, particularly its impact on long-haul travel

●        Commit to reforming APD when fiscal conditions allow, to better align the UK with international competitors

Sincerely,

Keith Glatz

Senior Vice President, International Affairs