Tax cut subject to airline deal

The Government is willing to abolish the €3 travel tax but only if airlines agree to restore capacity and reinstate cancelled routes, Minister for Transport Leo Varadkar said this morning.

Mr Varadkar said the Government was retaining the tax because the airlines were not restoring capacity. Abolition would be subject to an agreement being reached with the airlines to bring in additional passenger numbers, he said.

"As things stand, they have made it clear they are prepared to do nothing at all in return for the abolition of the travel tax. They want a lot more than that," Mr Varadkar told RTÉ's Morning Ireland.

The air travel tax on passengers leaving Irish airports, currently worth some €30 million to the exchequer, was reduced from €10 to €3 in last December’s budget.

Ryanair chief Michael O’Leary claimed at the time the tax cut would not do anything to reverse the decline in Irish air traffic and tourism. At press conference in Dublin this afternoon, Mr O'Leary said he expects more airline bankruptcies and mergers in the next year as higher oil prices and weaker consumer confidence affect carriers.

Mr Varadkar said the Government had hoped for a favourable response to the measure from the airline industry following but that this was not forthcoming.

“It hasn’t been possible to get sufficient commitments from airlines at this stage to allow me to abolish the tax but I am prepared to do so at any time if the airlines are prepared to meet me half-way on this,” Mr Varadkar said.

“You would get rid of the travel tax one day. The next day they’d want airport charges reduced. The third day they’d want maybe even to be paid to land at the airports. That’s the kind of game this industry is in, and I’m not going to get involved in any kind of games.”

Instead, the Government is planning to reinvest half of the revenue to promote travel to Ireland.

Mr Varadkar said the Government would work with the travel industry to target specific routes specifically in the United Kingdom and in Germany “to try and get them reopened or to try and increase the numbers of people using them”.

“We’ll review the situation in a few months time. I’m very willing and ready to abolish the travel tax. We want to do it but we can’t do it for nothing,” he said.