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29 January 2025, 16:11 | Updated: 29 January 2025, 16:13
Ryanair boss Michael O'Leary has said Rachel Reeves "hasn't a clue" about how to generate growth in aviation, and building a third runway at Heathrow is a ‘dead cat’, after the chancellor pledged her support for the plan.
O'Leary said the Chancellor should scrap air passenger duty (APD) rather than "waffle on" about the Heathrow expansion, which he described as "a dead cat" that would not happen before the 2040s at the earliest.
In a speech on growth in Oxfordshire on Wednesday, the Chancellor said the west London airport's expansion is "badly needed" because "for decades its growth has been constrained".
The scheme would involve around seven years of construction to produce a third runway and a new terminal, and would require more than 700 houses to be demolished and the M25 motorway to be moved into a tunnel.
Environmental groups have expressed major concerns over the impact of airport expansion on climate change, as it will bring higher levels of pollution and noise to the capital.
But in her budget in October 2024, Reeves announced increases in APD from the 2026/27 financial year, which means it will rise from £13 to £15 for those travelling in economy on a short-haul flight.
Mr O'Leary described APD at £15 as "insane" as it represents "a rate of tax of 33% on Ryanair's average ticket price".
Mr O'Leary told a press conference: "The UK continues to lose out on enormous growth opportunities because you have a Chancellor who hasn't a clue about how to deliver growth.
“[She] has had five years to get ready for it, and yet has managed to screw it up in her first budget."
"Nothing is designed to damage growth faster than increasing taxes on air travel,” he added.
The Irish businessman said his company could deliver 50% more passengers to the UK if the tax is scrapped, which would deliver growth in the aviation industry.
Heathrow’s third runway plan backed by Rachel Reeves
Ms Reeves said: “One of the reasons why we need to expand Heathrow is that there are emerging markets and new cities around the world that we aren't connected to because there aren't the slots at Heathrow - or indeed any other airport - to fly to."
Mr O'Leary disagreed, and said: "The third runway at Heathrow is a dead cat.
"If it ever arrives, it will be about 2040, 2045 or 2050, in fact long after I've departed from Ryanair.
"It will not deliver any growth. The thing that will deliver growth is abolishing APD."
He went on: "Here's the prize we've offered to Rachel Reeves. We deliver about 60 million passengers a year to the UK.
"Within five years, we could grow that by 50% to 90 million passengers, and all she has to do is abolish APD."
This would cost the Government £4 billion which would be "paid back two-fold within 12 months" because of growth in passengers, he said.
Representatives of other airlines have welcomed the announcement.
EasyJet boss Kenton Jarvis said: “As an island nation, this industry provides much-needed connectivity as well as creating many skilled jobs which contribute to the wider prosperity of the country.
“Expansion at Heathrow will provide consumer and economic benefits and represents a unique opportunity for easyJet to operate from the airport at scale for the first time and bring with it lower fares for consumers.”
A Virgin Atlantic spokesperson said: "Heathrow is critical national infrastructure and the UK's only hub airport, enabling connectivity and trade to global markets, yet it remains the world's most expensive airport with a service that falls short.
"We are supportive of growth and expansion at Heathrow, if, and only if, there is fundamental reform to the flawed regulatory model to ensure value for money for consumers, affordability for UK plc and support for a competitive UK aviation industry."
GMB regional organiser Perry Phillips said: "The Heathrow third runway expansion has finally been cleared for take-off.
"We welcome the Government's decision and the thousands of good, unionised jobs and apprenticeships the project will create.
"The project represents a huge boost for construction skills in this country, which will be vital for future infrastructure projects."