The government has announced a big cut in Air Passenger Duty (APD) in Northern Ireland in the first sign that it is aware of growing concerns about the impact of the tax.

APD on direct long-haul flights from Northern Ireland will be cut to the same rate as short-haul flights from November 1, reducing the tax on economy fares to the US from £60 to £12 and in business class from £120 to £24.

Chancellor George Osborne announced the move today. It will apply to the single scheduled long-haul service from Belfast International to New York Newark.

Continental Airlines, now merged with United Airlines, had threatened to suspend flights from Belfast because of APD. The carrier had joined travel association Abta and other industry bodies in lobbying to convince the government that Northern Ireland was a special case given the ease with which passengers could travel to Dublin to take flights taxed at just euro3 per passenger.

In a statement, the Treasury said: “Continental Flight CO95 from Belfast International to New York/Newark will continue to operate and Northern Ireland will gain a fresh opportunity to develop other long-haul routes to the rest of the world.”

Announcing the move, Osborne said: “The government has taken measures to protect the only direct long-haul service operating from Northern Ireland and with it the jobs of those who serve the Belfast route.

“Northern Ireland faces a unique challenge in attracting traffic – including valuable business customers – into its airports. By announcing this immediate cut and our intention to devolve aspects of APD, the government is renewing its commitment to stimulating and rebalancing the Northern Ireland economy.”

The Treasury said: “Northern Ireland’s airports operate in unique circumstances within the UK. The land border with the Republic of Ireland, with its differential rates of air passenger tax, had threatened to make long-haul flights from Belfast uneconomic.

“The government will launch a parallel process to devolve aspects of APD to the Northern Ireland Assembly.”