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

Ryanair chief executive Michael O’Leary on Monday admonished the U.K. government over its push to raise taxes on passenger flights, warning that the policy will see airlines move planes out of the country.

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

His comments come ahead of the U.K. government’s high-stakes Autumn Budget on Nov. 26, with Finance Minister Rachel Reeves under pressure to resolve a fiscal conundrum over spending, taxation and borrowing.

Ryanair’s O’Leary said there had been a trend of European governments rolling back “mad environmental taxes” and subsequently being rewarded with bumper economic growth.

“So, you see markets like Sweden, Hungary, Italy and Croatia abolishing environmental taxes and then you have the laggards, like Germany, France and Rachel Reeves here in the U.K., remarkably talking about wanting growth and yet increasing taxes on air travel — on an island, on the periphery in Europe,” O’Leary told CNBC’s Silvia Amaro on Monday.

“Which again confirms my belief that Rachel Reeves hasn’t a clue how to deliver growth despite the fact we have written to her offering her significant growth, particularly in the regions of the U.K,” O’Leary said.

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

The CEO of Europe’s largest low-cost carrier singled out Britain’s air passenger duty (APD), referring to a tax per passenger on flights that depart the U.K. for domestic and international destinations.

In last year’s Autumn Budget, Reeves announced strict rules that limited the government’s room for maneuver on spending and borrowing, with day-to-day government spending funded by tax revenues and not borrowing.

As part of a broader push 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, with a 50% raise for private jets and general increases for other flights.

To be sure, APD is a significant source of government income, with the Office for Budget Responsibility estimating revenues of £4.7 billion ($6.18 billion) in 2025-2026. Aviation, meanwhile, is known to be one of the fastest-growing sources of greenhouse gas emissions.

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

“It’s ridiculous,” O’Leary said. “For a family of four, it becomes prohibitive. We wrote to Rachel Reeves when she first got elected and said we can deliver you 50% traffic growth, not in London, but in the regions of the U.K., where they really need growth in those red wall seats, in Birmingham, Manchester, Glasgow, Edinburgh, Bristol.”

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

Asked whether Ryanair has had any new conversations with the Treasury ahead of the Autumn Budget, O’Leary replied: “No, they’re hopeless.”

“We got a stupid letter back from number 11 saying, ‘oh an increase of 2 pounds in APD is only 1% of average ticket prices.’ Now, I don’t know where they buy their tickets but our average ticket price is 45 pounds, so an increase of 2 pounds is a 5% increase. They can’t even do their own maths … They’re useless,” O’Leary said.

If Reeves increases APD again in the Autumn Budget, Ryanair’s CEO said the company would consider moving aircraft to countries watering down their environmental taxes, naming Sweden, Hungary and Italy as potential options.

Shares of Ryanair were last seen trading 3% higher on Monday morning, reversing earlier losses.

— CNBC’s Silvia Amaro contributed to this report.