Airline shares fall on UK seat tax plan

Airline shares fall on UK seat tax plan

Shares in Europe’s main airlines fell sharply after the British government said it would consider an independent proposal to charge carriers a seat tax in order to cover the cost of transporting stranded passengers if an airline goes bust.

Ryanair’s share price fell by over 2.2%, while Aer Lingus-owner IAG was down by over 2.3%. Lufthansa and Air France-KLM both tumbled by over 3% and EasyJet was down by nearly 1.4%.

The recommendations seek to even out anomalies in protection for British travellers, highlighted when UK carrier Monarch Airlines collapsed in 2017.

However, airlines have rejected the review’s proposed “airline seat levy” which would aim to cost less than 50p per passenger.

A spokesperson for IAG said: “Airline passengers should not be charged a levy to bail out other carriers when they go bust.”

British transport minister Chris Grayling said he would consider the proposals by the Airline Insolvency Review, which was set up by UK finance minister Philip Hammond after the country’s government and its Civil Aviation Authority had to step in to help repatriate Monarch customers.

The review also suggests that airlines should provide a security to be called on in the event of its insolvency.

But Airlines UK, which represents Britain’s carriers, said that any tax would make travel more expensive.

“50p may not sound much but airlines operate on wafer thin margins,” Tim Alderslade, its chief executive, said.

“The chances of booking with an airline that goes bust remain extremely small.”

- Additional reporting Reuters

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