UK passengers will be relieved to hear news of Osborne's overhaul of the much-hated Air Passenger Duty (APD) airport departure tax.
Announcing changes, Chancellor George Osborne admitted that the current system was "crazy and unjust" in that Britons travelling on, say, eight-hour flights to Barbados pay more APD than those on 11-hour flights to California. Source: PA.
Those on ultra long-haul flights to destinations such as Australia and south east Asia pay even more in APD.
Passengers on long-haul flights will benefit from the new changes.
Mr Osborne said that he was scrapping the two highest of the four APD tax bands so that those on long-haul flights pay only as much as they do now travelling to the USA.
UK airlines, travel companies and Caribbean tourist boards have long bemoaned the APD system and there was a cautious welcome today to the changes.
A Virgin Atlantic spokeswoman said: "A two-band APD rate is a very welcome simplification to remove some of the biggest distortions of the current system, which the Chancellor himself admitted is crazy and unjust.
"The Government has rightly recognised the damage APD is having on exporters and the travelling public alike."
She went on: "A tax system which penalised high growth emerging economies such as China and India was always contrary to the Government's stated policy on trade and exports, so this is a positive step that recognises the impact of this economically damaging tax.
"There is a growing body of evidence demonstrating the huge economic benefits to the UK of reducing or abolishing APD and we hope that the Government will continue to go further in the long run."
A British Airways spokeswoman said: "This is window dressing a tax that even George Osborne says is 'crazy'.
"It still punishes families and costs UK jobs. The only long-term solution is to scrap APD in its entirety and allow the aviation and tourism industries to flourish, to the benefit of the wider UK economy. APD remains the highest aviation tax levied in the world."
Dale Keller, chief executive of the Board of Airline Representatives in the UK, which speaks for 75 UK carriers, said: "The Government has finally acknowledged what the industry and business knew all along - that the highest rates of aviation tax in the world were a brake on driving the UK's economic growth with emerging markets."
He went on: "Of course we would like the Chancellor to go further still on reducing APD but this is a step in the right direction and we will continue its engagement with the Government to deliver the fair and proportionate aviation tax that the UK deserves."
In the meantime, air passengers will have to put up with the present four-band APD system, as the changes will not take effect until April 1 2015.
Travellers will also have to contend with an RPI-inflation rise in the existing system from April 1 this year and another RPI-inflation rise on the new, two-band system from April 1 next year.
Mr Osborne also announced that the Government was extending the scope of the existing regional air connectivity fund to include start-up aid for new routes from regional airports.
Darren Caplan, chief executive of the Airport Operators Association, said: "It is clear the Government has recognised that APD represents a growing barrier to growth and investment, putting the UK at a competitive disadvantage compared to our nearest international rivals.
"This reform of APD - together with the measures announced to assist the start-up of new routes from airports around the country - is a very welcome step from the Treasury."
Mark Tanzer, chief executive of travel organisation Abta, said he strongly welcomed the APD changes as "a first step in the reform of this damaging tax".
He said moving all long-haul flights into band B of APD at current levels would save passengers more than £200 million annually, and should boost travel and tourism as well as promote greater UK connectivity.
He added that Abta would continue to call for a reduction in overall rates of APD.
He said that, at current levels, a family of four will save £112 on flights to Sydney and £64 on flights to Cancun in Mexico.