British Airways owner IAG has warned it could opt to keep new low-cost airline Level out of the UK over air passenger duty.
IAG launched the low-cost, long-haul carrier last year with flights from Barcelona to the US, and in November announced plans to set up a new base from Paris, flying to the Caribbean and North America from July.
The firm's chief executive Willie Walsh has spoken of expansion plans for the airline, and was initially weighing up Paris and Rome for the choice of its second base, though previously said he would consider the UK for the future.
Today though, Walsh said he had written to MPs, saying air passenger duty - which is levied against each passenger on every flight departing from the UK - undermines Britain's position as a global trading nation post-Brexit, and reduces the chance of him bringing Level to the UK.
British consumers are losing out because of APD. In Spain and France, Level can offer lower fares than it can in the UK – and that goes for other long-haul low cost airlines too.
MPs need to know that APD undermines our ability to introduce new low-cost flights that would benefit their constituents. If APD was axed, IAG could open new routes and operate Level from regional airports.
Walsh has told MPs that abolishing APD would make it more likely that Level could operate from Birmingham, Cardiff, Edinburgh and Manchester, saying it is not financially viable with Level's fares starting at around £88 one-way, when long-haul economy APD is £78.
The IAG boss added: “By hiking APD in the last Budget, it’s clear the Chancellor doesn’t understand that Britain is losing out to countries that don’t have draconian aviation taxes”.
Shares in IAG were flat in early afternoon trading.
Ahead of the November budget, the aviation industry had called for cuts to APD to help keep Britain competitive. Chancellor Philip Hammond said short-haul APD rates for 2019-2020 will be frozen, as they have been since 2012.
The long-haul rate for economy passengers will also be frozen at the 2018-19 rates, but Hammond said that will be paid for by a rise on premium class tickets and private jets.
A spokesperson for the Treasury said:
We have frozen Air Passenger Duty for most flights, keeping the cost of travel down for 95 per cent of the population. APD will only increase for premium class long-haul flights.