A group of tour operators has lost its High Court challenge against the Government’s Air Passenger Duty (APD), a controversial £2 billion a year levy branded a “stealth tax of the skies”.

Dismissing a legal challenge brought by the Federation of Tour Operators (FTO) and two of its member companies - Tui UK and Kuoni Travel – a judge ruled that APD was a lawful charge.

The judge also upheld Gordon Brown’s decision earlier this year to double APD, leaving holiday companies with a “shock” bill of some £50 million they could not pass on to customers because of insufficient notice of the increase.

Dismissing the case, which was an application for a judicial review, a mechanism through which interested parties can attempt to challenge Government decisions through the courts, Mr Justice Stanley Burnton, said had has “some sympathy” for the tour operators.

He criticised the Treasury’s “decision-making process”, saying that package travel regulations had been ignored - but insisted there was no legal basis for the High Court challenge.

“The claimants have not established any of their grounds for challenging APD or its increase,” the judge said.

The FTO was refused permission to appeal, but can still ask the Court of Appeal directly to consider its case.

It said it was “disappointed” with the outcome and was considering a possible appeal.

It rejected Government claims that the doubling of the tax while Mr Brown was Chancellor of the Exchequer was an “environmental measure”.

The FTO said the legal action had arisen from “the Government’s failure to give the industry sufficient notice of the tax rise”.

Tour operators were faced with the £50 million bill because package travel regulations prevented them, unlike airlines, from being able to build the increase, which took effect from February 1, into prices for those already booked to fly.

The FTO said: “The judge found there were no insurmountable legal or administrative difficulties preventing the Government from giving tour operators exemption in relation to existing bookings.

“Its decision to ignore the industry’s calls for this exemption effectively imposed a major and wholly unexpected financial penalty for the sector to absorb - one which disadvantages it against its many travel and airline industry competitors.”

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