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Highlights:
- Potential Flight Cuts: Ryanair could slash hundreds of domestic flights if air passenger duty is raised in the upcoming Budget.
- CEO's Warning: Michael O’Leary argued that increased aviation taxes would reduce demand and undermine efforts to stimulate tourism and economic growth.
- Past Precedent: Ryanair previously reduced capacity in Germany following a tax hike and may take similar action in the UK.
Ryanair Holdings PLC (LSE:RYA) has signalled that hundreds of domestic flights could face the axe if Chancellor Rachel Reeves proceeds with an anticipated hike in aviation tax during the upcoming Autumn Budget. This warning comes as businesses brace for potential tax increases, with the airline’s CEO, Michael O’Leary, stating that increased air passenger duty (APD) would negatively impact demand, leading to inevitable cutbacks.
O’Leary's remarks highlight the precarious state of many of the airline’s internal routes, which he claims “barely break even.” He emphasized that should APD for domestic flights rise beyond its current rate of £7, Ryanair would be forced to cut capacity. The anticipated changes in the Budget, expected on October 30, are part of the UK government's efforts to address a £22 billion shortfall in public finances.
The Ryanair CEO has voiced concerns about the potential economic impact of the tax hike, arguing that it would come at a time when the UK should be focused on stimulating tourism and economic growth, particularly in the post-Brexit era. O’Leary criticized the government’s lack of pro-growth policies and pointed to aviation as a key driver of immediate economic activity.
In a similar move, Ryanair previously cut 12% of its capacity in Germany following tax hikes, indicating that the airline could take similar steps if the UK imposes increased taxes on air travel. Additionally, the airline is already grappling with the prospect of fewer flights next year due to ongoing delays in aircraft deliveries from Boeing.
