Other countries have been encouraged to follow Austria in announcing plans to cut its passenger tax.
Iata urged action from the UK and Germany as it welcomed a move to halve the Austrian air travel tax from January 1, 2018.
The Austrian Ministers Council confirmed that the decision was taken to increase the attractiveness of the country as a business and tourism destination, to secure the future of Vienna airport as an international aviation hub and to create jobs and increase economic development.
Iata director general and chief executive, Alexandre de Juniac, said: “In cutting its travel tax, the Austrian government has taken an important step in the right direction. This is great news for Austrian air travellers and for everyone thinking of visiting Austria for tourism or business.
“Other countries should take note, particularly Germany and the UK, which continue to heavily tax air passengers.
“In fact, the UK chancellor has an opportunity in today’s budget statement to signal that Britain is open for business with a major cut in UK Air Passenger Duty.”
The new structure of the Austrian tax will be €3.50 for short haul, €7.50 for medium haul, and €17.50 for long haul.
The cuts will create economic benefits, but these would be maximized if the tax were reduced to zero, Iata claimed.
Analysis by the airline trade body in 2015 revealed that removing the tax would increase international travel by 2.7% and create 1700 jobs in the country.
De Juniac added: “While the tax cut is good news, it is not the end of the story. There is more that the government can do to strengthen air transport in Austria.
“Ultimately, the tax should be scrapped completely. And Vienna airport needs a third runway. With expansion seemingly blocked in Munich and Zurich, the region is suffering from a lack of airport capacity.
“Austria has a golden opportunity to take a leadership position if it can put a vision forward for Vienna to be a major hub. And with the industry’s strong environmental commitments, this can be done sustainably.”
Plans for a third runway at Vienna have been delayed by environmental concerns.
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