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

Ryanair chief executive Michael O’Leary on Monday warned that the British government is pushing to increase taxes on passenger jets, warning that the policy would force airlines to move planes overseas.

After reporting a big increase in first-half profits, the outspoken CEO said on CNBC’s “European Early Edition” that the Labor government’s push to increase air travel taxes runs counter to its strategy to accelerate economic growth.

His comments came ahead of the UK government’s high-stakes Autumn Budget presentation on November 26, as Chancellor of the Exchequer Rachel Reeves comes under pressure to resolve fiscal conundrums over spending, taxation and borrowing.

Ryanair’s Mr O’Leary said European governments had tended to roll back “crazy environmental taxes” and then be rewarded with exponential economic growth.

“So while markets like Sweden, Hungary, Italy and Croatia are scrapping environmental taxes, we’re talking significantly about less developed countries like Germany, France and Rachel Reeves here in the UK increasing taxes on air travel on remote islands in Europe even though they want to grow,” O’Leary told CNBC’s Sylvia Amaro on Monday.

“This once again confirms my belief that Rachel Reeves has no idea how she is going to deliver growth, despite the fact that we have written to her proposing significant growth, particularly in the UK region,” Mr O’Leary said.

A Treasury spokesperson could not be reached for comment when contacted by CNBC on Monday morning.

The CEO of Europe’s largest low-cost airline singled out the UK’s Air Passenger Duty (APD), a per-passenger tax levied on flights departing from the UK to domestic and international destinations.

In last fall’s budget, Mr. Reeves announced strict rules that would ensure that day-to-day government spending would be financed by tax revenue, not debt, and limit the government’s maneuverability on spending and borrowing.

As part of a wider effort to shore up public finances and encourage more sustainable travel options, Prime Minister Keir Starmer’s government will increase APD fees from April next year, with a 50% increase for private jets and a general increase for all other flights.

Indeed, APD is an important source of government revenue, with the Office for Budget Responsibility estimating its revenue in 2025-2026 at £4.7 billion ($6.18 billion). Meanwhile, aviation is known to be one of the fastest growing sources of greenhouse gas emissions.

Mr O’Leary said the government’s plan to increase APD from April next year would result in almost 33% tax being levied on Ryanair’s average ticket price, which is around £45.

“That’s ridiculous,” O’Leary said. “For a family of four, that’s an exorbitant amount of money. We wrote to Rachel Reeves when she was first elected and said we could deliver a 50 per cent increase in traffic, not in London, but in areas of England that really need increases in red-walled seats, like Birmingham, Manchester, Glasgow, Edinburgh and Bristol.”

He added: “Just abolish APD outside London. London is full, London can pay APD, but abolish it outside London. About 2 billion of the budget would be lost. That would be recovered as consumer spending in additional consumer spending, VAT on additional visitors within a year. No response.”

Asked whether Ryanair had had any new discussions with the Treasury ahead of the Autumn Budget, Mr O’Leary said: “No, it’s hopeless.”

“I got a stupid letter back from number 11 saying, ‘Oh, a £2 increase in APD is only 1% of the average ticket price.'” Now, I don’t know where they’re buying their tickets, but the average ticket price is £45, so an increase of £2 equates to a 5% increase. They can’t even do the math themselves… they’re useless,” O’Leary said.

Ryanair’s chief executive said if Mr Reeves were to increase APD again in the autumn budget, the airline would consider moving its planes to countries with less environmental taxes, citing Sweden, Hungary and Italy as potential destinations.

Ryanair’s share price rose tentatively, ending Monday’s trading up around 4%.

—CNBC’s Silvia Amaro contributed to this report.