Ryanair CEO Michael O’Leary slams UK government over travel tax plans

Ryanair Chief Executive Michael O’Leary on Monday slammed the UK government over pressure to increase taxes on passenger flights, warning that the policy would force airlines to move their planes out of the country.

Speaking to CNBC’s “Europe Early Edition” after reporting a significant rise in first-half profit, the outspoken CEO described the Labor government’s push to raise air travel taxes as contrary to its strategy to spur economic growth.

His comments come ahead of the UK government’s high-risk autumn budget on November 26, with Finance Minister Rachel Reeves under pressure to solve the fiscal puzzle over spending, taxation and borrowing.

Ryanair’s O’Leary said there has been a trend for European governments to roll back “crazy environmental taxes” and subsequently be rewarded with bumper economic growth.

“So, you see markets like Sweden, Hungary, Italy and Croatia eliminating environmental taxes and then you have laggards like Germany, France and Rachel Reeves in the UK, who remarkably want growth and yet are raising taxes on air travel — on an island, on the periphery in Europe,” O’Leary told CNBC’s Silvia Amaro on Monday.

O’Leary said, “Which again confirms my belief that Rachel Reeves has no idea how to drive development, despite the fact that we have written to her specifically offering significant development in UK areas.”

A Treasury spokesperson was not immediately available for comment when contacted by CNBC on Monday morning.

The CEO of Europe’s largest low-cost carrier highlighted the UK air passenger charge (APD), referring to the per passenger tax on flights departing from the UK to domestic and international destinations.

In last year’s autumn budget, Reeves announced strict rules which limited the government’s scope for maneuver on spending and borrowing, with day-to-day government spending funded by tax revenues and not borrowing.

As part of a broader effort to boost public finances and encourage more sustainable travel options, Prime Minister Keir Starmer’s government intends to increase APD rates from April next year, including a 50% increase for private jets and a general increase for other flights.

Certainly, APDs are a significant source of government income, with the Office for Budget Responsibility projecting revenues of £4.7 billion ($6.18 billion) in 2025–2026. Meanwhile, aviation is considered one of the fastest growing sources of greenhouse gas emissions.

O’Leary said the Government’s plan to increase the APD from April next year would represent a tax of around 33% on the average price of a Ryanair flight, which he said was around £45.

“It’s ridiculous,” O’Leary said. “For a family of four, it becomes prohibitive. When Rachel Reeves was first elected we wrote to her and said we can give you a 50% traffic increase, not in London, but in areas of the UK where they really need an increase in those red wall seats in Birmingham, Manchester, Glasgow, Edinburgh, Bristol.”

He added: “Just scrap the APD outside London. You know, London is full, London can pay the APD, but scrap it outside London. That would cost them about £2 billion of the budget, they would get that back in extra consumer spending, VAT on extra visitors on consumer spending within a year. No response.”

Asked whether Ryanair had any new talks with the Treasury ahead of the autumn budget, O’Leary replied: “No, they are disappointing.”

“We got a silly letter from Number 11 saying, ‘Oh, the £2 increase in APD is only 1% of average ticket prices.’ Now, I don’t know where they buy their tickets from but our average ticket price is £45, so a £2 increase is a 5% increase. They can’t even do their math…they’re useless,” O’Leary said.

If Reeves increases the APD again in the autumn budget, Ryanair’s CEO said the company would consider taking aircraft to countries that reduce their environmental taxes, naming Sweden, Hungary and Italy as possible options.

Ryanair shares were last seen trading 2.2% lower on Monday morning.