Airlines reacted with a mix of approval and irritation on Tuesday as the government deferred plans to bring in a new passenger tax but said it would look at selling its stake in NATS, the air traffic controller.

The proposed sale of the government’s 49 per cent holding in NATS also drew an angry response from the union representing the group’s workers, who said: “Air traffic control is too important to be left to the vagaries of the market.”

A move to replace the existing air passenger duty, which is based on the number of passengers, with a “per-plane” tax, was promoted in the new coalition’s early policy documents as a way of improving the environment by encouraging fuller aircraft.

But instead of outlining the measure, George Osborne said the government would “explore changes to the aviation tax system, including switching from a per-passenger to a per-plane duty” and promised “major changes” would be subject to public consultation.

The deferral, however brief, was welcomed by longhaul airlines such as British Airways and Virgin Atlantic, which are likely to be hit harder than their budget rivals who traditionally fly fuller aircraft.

A chart showing revenue from air passenger duty
© Financial Times

“We continue to believe such a tax would significantly damage Britain’s economic competitiveness without bringing any practical environmental benefit,” BA said.

Virgin said it was “right that no changes are made without discussing with business, the industry and passengers” on a tax that would make the UK a “no through route” for air travellers.

EasyJet, the budget airline, which has always been in favour of the per-plane tax, said it was pleased to see the government make a clear statement in favour of reforming what it called the “daft” air passenger duty, which is due to rise from November.

“Four out of five British travellers would be better off under a per plane tax as private jets, cargo aircraft and travellers changing planes in Heathrow will start paying their fair share,” said Andy Harrison, EasyJet chief executive.

EasyJet was less pleased by the prospect of the government selling its 49 per cent stake in NATS.

“We do not support the sale of NATS to a private company that will seek to further increase charges,” said the airline, part of a consortium of seven carriers known as the Airline Group that has a 42 per cent stake in NATS.

BAA, Heathrow’s owner, has a 4 per cent stake and the remaining 5 per cent of shares are held by staff at NATS, which made a £135m pre-tax profit in the year to the end of March 2009.

Prospect, the union representing air traffic controllers, called the move a “knee-jerk reaction by the Treasury”.

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