The role of governments in aerial recovery

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The role of governments in aerial recovery
Source: ALTA
September 19, 2022

The international context continues to pose considerable challenges. How can governments and the airline industry work together to reduce the current uncertainty?

Although the Latin American and Caribbean region is experiencing a significant recovery in the number of air passengers after the worst moment of the health crisis, the international context continues to pose considerable challenges, such as the increase in fuel prices, inflation, the risk of recession and volatility in exchange rates. ALTA Aviaton Law Americas 2022, held in Rio de Janeiro, echoed this discussion with a panel that brought together important members of the industry.

The dialogue had as panelists Mauricio Sana, CEO of Flybondi; Ronei Glanzmann, Secretary of Civil Aviation of Brazil; Alejandro Muñoz, Deputy Director of Members and External Relations, Latin America and the Caribbean of IATA, and Renata Fonseca, Chief Legal Officer of Gol. Viviana Martín, Director of Government Relations Avianca and General Manager of Avianca Costa Rica, played the role of moderator.

There it was stated that, although the Latin American and Caribbean region has experienced a significant recovery in the number of air passengers after the parenthesis caused by the pandemic, the international context continues to pose considerable challenges that require the joint action of governments and the industry. aerial.

In July 2022, Latin America and the Caribbean reached 90.5% of its 2019 passenger traffic levels, according to data from the Latin American and Caribbean Air Transport Association (ALTA), highlighting that the recovery has been faster in countries that have lifted restrictions on international travel more quickly, such as the case of the Dominican Republic, Colombia and Mexico, markets that have even exceeded their figures for the year before the pandemic by 16%, 9% and 6%, respectively.

“The contrast reflected in the number of passengers transported in each country shows that efficient, intelligent, predictable and harmonized rules drive air transport, provide security for operators and confidence for users to use this essential means of transport. In the midst of challenges especially related to operating costs, we need to work with governments to generate certainties so that the industry can transfer these efficiencies to users”, commented José Ricardo Botelho, executive director of ALTA.

Another area where governments could contribute to the industry is taxation. The increase in taxes and fees directly affects the final price of tickets, which discourages the use of air transport and the influx of travelers. However, previous experiences in countries such as Colombia and Chile demonstrate with facts that a reduction in taxes stimulates travel and, with it, promotes a broad economic value chain that generates jobs, development and opportunities for destinations that receive travelers.

In Colombia, for example, VAT on tickets was reduced from 19 to 5%. This reduction in force until December 31, 2022 has had a highly positive impact on the growth in the number of passengers, which in the accumulated from January to July 2022 has had a growth of 16% vs. 2019. Unlike fees and taxes, ticket rates have tended to fall over time thanks to an effort by operators to transfer their efficiencies to the user through more efficient technologies and operations. According to estimates made by ALTA, the average rate was reduced by 44% between 2011 and 2019.

For his part, Mauricio Sana stated that “Aviation can be thought of as tourism, but air transport goes further. In Argentina, for example, Flybondi transports entrepreneurs and SMEs between provinces, generating business, jobs and opportunities that are not only related to tourism. That there are passengers in the airports generates investments, generates new businesses. Therefore, the review of regulations and especially tax issues are essential to generate incentives and more demand. The work of promoting smart and modern regulations is key.”

Ronei Glanzmann commented that the crisis brings opportunities, as an example of this they took advantage of "the 97% reduction in passenger traffic to make investments in the Congonhas and Santos Dumont airports, for example, which are congested and in full operation we would not have been able to intervene." The secretary also shared that Brazil has the lowest airport fees in the world and they are still working to lower taxes on some fees. “As of January 1, 2023, the Guarulhos and RIOgaleão airports will have a 36% reduction in taxes on airport fees; which will help users to have better total rates”.

Muñoz from IATA, emphasized that "we must continue working together with governments to improve the regulations of the sector and, more than that, improve the processes of issuing standards, so that they respond to the real needs of the industry and the consumers. For this reason, the IATA Smarter Regulation principle can be very useful to generate the necessary synergies and be able to support the growth of connectivity and the benefits of aviation in the economies of the countries of our region”.


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