Aviation boosts the regional economy, but faces barriers

Aviation has established itself as a fundamental pillar of economic and social development in Latin America. In Colombia alone, the sector contributes USD $15.5 billion annually to the Gross Domestic Product. However, its growth faces significant challenges related to high operating costs and legislative initiatives that threaten to restrict its competitiveness.

During the most recent Wings of Change Americas (WOCA) event, organized by IATA in Bogotá, key data was shared on the current situation of the sector in the region. One of the main focuses was the tax burden: in Latin America, 40% of the cost of air tickets corresponds to taxes and fees, a percentage significantly higher than the global average of 27%. This difference directly impacts demand and makes it difficult for many users to access air transport.

Furthermore, airline profitability in the region remains limited. While the average profit per passenger worldwide is USD $7.2 million, in Latin America it barely reaches USD $3.4 million, compromising companies' investment and expansion opportunities.

Regulatory risks on the rise

Another critical issue is the progress of legislative projects that could affect the sector's operations. In Colombia, a proposal seeking to impose fare caps and regulate overbooking could increase prices and reduce commercial flexibility. Similar initiatives are being debated in Brazil, Chile, Mexico, and Peru. In the latter country, a law that would prohibit charging for seat assignments or carry-on baggage threatens to further erode airlines' profit margins.

The case of Brazil is also worrying: a proposed tax reform that would increase VAT by 26.5% would raise the average cost of domestic flights from USD $130 to USD $160, and international flights from USD $740 to USD $965. According to IATA, this measure could lead to a drop in demand of up to 30%.

Infrastructure: the potential yet to be developed

Beyond regulation and taxes, infrastructure was also highlighted as a key factor for aviation development in the region. In Bogotá, for example, a joint study involving industry, government, and IATA was conducted more than two years ago to optimize the airspace and operation of El Dorado Airport. However, the report's recommendations have only been partially implemented so far.

"Resuming and advancing these proposals is essential to improving efficiency, reducing delays, and increasing operational capacity," IATA emphasized, also emphasizing the need to replicate these efforts at other high-demand terminals in Latin America.

A call for collaboration

Paula Bernal, IATA's Country Manager for Colombia, emphasized during the event that "aviation connects dreams, businesses, and generates well-being." She also called on authorities, regulators, and social stakeholders to work together to create a modern, competitive industry aligned with user needs.

Aviation has the potential to continue transforming the region, but this requires a fair, sustainable, and long-term operating environment. The key will be finding the right balance between economic growth, citizen access, and business viability.

Source: IATA.