UK budget imposes 'tax on growth' as air duties set to increase, says Virgin Atlantic CEO.

• On Monday, Shai Weiss, CEO of Virgin Atlantic, stated that the U.K. Labour government's October budget imposed a "tax on growth" through increased rates on the aviation industry.
• The Air Passenger Duty on short-haul economy class tickets will increase from £13 to £15 from April 2026, while the rate for all other classes will rise from £28 to £32.
• On Monday, the head of the Confederation of British Industry stated that businesses were delaying decisions on expansion and investment due to the budget, which followed closely after Labour announced numerous labor market reforms.

Shai Weiss, CEO of Virgin Atlantic, stated on Monday that the U.K. Labour government's October budget imposed a "tax on growth" through increased rates on the aviation industry.

During the Airlines 2024 conference in London, Weiss stated that both Labour and the previous Conservative administration had not adequately recognized aviation as a vital strategic asset for the U.K.

Weiss stated that all we've witnessed is an increase in Air Passenger Duty (APD). APD is a tax imposed on airlines and aircraft operators based on the number of passengers and the distance traveled, with rates varying by cabin class. While not always the case, APD is typically passed on to customers in ticket costs.

Weiss stated on Monday that he considers the Budget to be a tax on growth, while acknowledging its necessity in covering Britain's budget deficit, and emphasizing the importance of recognizing aviation's contribution to the wider U.K. economy.

From April 2026, the Air Passenger Duty (APD) will increase on short-haul economy class tickets to £15 ($18.90) from £13, and the rate on other cabin classes will rise to £32 from £28. For journeys between 2,001 and 5,500 miles, APD will increase to £102 from £90 in economy and to £244 from £216 in other classes.

The U.K. Treasury has announced that the Air Passenger Duty (APD) rates will increase by the rate of inflation measured in the Retail Price Index, with an additional increase to account for inflation not included in previous budgets. According to Treasury forecasts, the higher rate of APD, which also includes a 50% rate on private jet passengers, will result in an annual revenue generation of approximately £500 million, up from £100 million.

Governments are increasingly turning to aviation taxes as a way to generate revenue while also working towards carbon emission reduction targets. However, the aviation industry contends that airlines are already facing low profit margins and that higher air fares can harm the broader economy and hinder investment in sustainable jet fuels.

On Monday afternoon, Transport Minister Louise Haigh will also be a speaker at the event.

The government heavily courted businesses during its successful election campaign, promising regulatory reform and pro-growth policies. However, many British corporations and trade groups have reacted negatively to the budget, which contained a total £40 billion ($50.2 billion) in tax hikes heavily oriented toward businesses.

The finance minister has emphasized that the measures were necessary to address a budget deficit and decrease the U.K.'s debt.

On Monday, the head of the Confederation of British Industry stated at the group's annual conference in London that businesses were delaying decisions on expansion and investment due to the budget, which was announced shortly after Labour unveiled numerous labor market reforms.

The Employment Rights Bill and the increase in employer National Insurance contributions have surprised many businesses, resulting in a significant financial burden.

CNBC has contacted the U.K. Treasury for comment.

Trent issues to continue

Virgin Atlantic's Weiss stated during Airlines 2024 that "if fortune smiles" the airline was on track to achieve a return to profitability and another year of record earnings in 2024.

Despite reporting a £139 million ($175 million) loss in 2023, U.K.-based Virgin Atlantic, which is 49% owned by a U.S. carrier and 51% owned by Richard Branson's Virgin Group, expects to return to profitability as its pandemic-era difficulties ease.

Rolls-Royce Trent 1000 engine issues, which are affecting many carriers that fly Boeing's B787, could impact Virgin Atlantic's scheduling and finances throughout 2025, according to Weiss. He added that the situation could either improve or worsen.

The launch of flights to Accra and resumption of Virgin Atlantic's Tel Aviv route have been delayed until winter 2025-2026 due to repairs to the aircraft's engines.

Despite the Trent 1000 issues and broader industry supply chain issues decreasing overall passenger capacity, Weiss predicted that Virgin Atlantic pricing would remain "relatively stable" into next year.