First Choice, the leading tour operator, is threatening to drop its premier class service and carbon emission match-funding scheme as a result of the chancellor’s rise in air passenger duty.
Travel industry dismay at the measure, announced by Gordon Brown in his pre-Budget report, turned to anger as companies said the February 1 start of the increase gave them little time to prepare.
Peter Long, chief executive of First Choice, said the duty would generate £21m a year from “mainstream” holidaymakers – those on traditional tour packages. He said that was three times the cost of offsetting CO2 emissions by its customers.
“This is a tax job to cover a hole in the government’s finances,” he said.
The duty is doubling to £10 for European economy passengers and to £20 on business class fares. On long-haul flights it will increase to £40 for economy and to £80 for business and first class.
Mr Long said he would consider dropping its premier class offer, which gives long-haul passengers extra leg room, to avoid being classified as a business class.
Unlike the large premiums paid for business and club class for other flights, First Choice charges a premium of about £150 to £300 for upgrades.
“It is not as if there is a huge margin differential,” he said. “If we have to charge an extra £40, the question is whether we would sell it. It’s price sensitive; it becomes less attractive.”
The duty rise is also prompting the company to reconsider launching its carbon offset scheme in March, in which it matches donations from passengers to
“You can’t do both,” Mr Long said, demanding that airlines be audited independently and charged accordingly.
Analysts believe the increase can only accelerate consolidation in the sector as passengers switch from tour packages to specialist holidays.
First Choice said the duty would now make up 10 per cent of the average cost of a family holiday to Florida.
A family of four flying premier class to Florida would pay an extra £436 for the upgrade plus £320 for the duty, 73 per cent of the cost of the upgrade. The company also predicted a fall in long-haul tourism to developing countries.
Dermot Blastland, managing director of the company’s mainstream sector, said: “Tourism can be a force for good but this tax is a farce. We continue to believe that proper carbon management that includes the consumer in that process is the right way forward, not blunt taxation.”