Taxing times

posted on 5th June 2023
Taxing times

Latin America’s uptick in new flights, airlines and aircraft is a solid sign that the region has finally begun to recover after enduring three airline bankruptcies and economic turmoil. However, governmental meddling – including new taxes on travel – threatens to quell that progress, said Peter Cerda, IATA Regional Vice-President Americas.
“All cities compete on a global platform and the best package at the best price will win,” said Cerda. “But we have flight-shaming in Europe if you take your family on vacation and higher taxes being assessed in countries like Argentina.
“With gains from travel and tourism, we’re seeing new airport and local fees that turn away travellers,” he said, noting that taxes now account for 52% of the cost to fly internationally from Argentina.
“Next-generation Air Traffic Management systems and new infrastructure have taken a long time, and we’ll get to the moon and back before we get the basics done,” said Cerda.
“We are accommodating the 4 billion passengers that will travel this year and that shouldn’t be overlooked,” he went on, but: “We have to do a better job as an industry of communicating and being story tellers. We have to tell how we make everybody’s lives better, and governments need to treat us as strategic partners and not as adversaries.”
Cerda noted that governments have a short memory, discounting that airlines kept flying even when countries shut down. “Regulators are looking at what’s not going right, but politicians don’t recognise the complexities of restarting a network, hiring, bringing aircraft from the desert. We have issues like safety that deserve the focus.”

Latin traffic still down
In recent years, the aviation industry in Latin America and the Caribbean has shown huge resilience and, in 2022, consolidated its position as the region with the best passenger recovery rates.
According to IATA, Latin American airlines posted a 119.2% traffic rise in 2022 over full year 2021. Annual capacity climbed 93.3% and load factor increased 9.7 percentage points to 82.2%, the highest among the global regions. December demand climbed 37.0% compared to December 2021.

Mexican restrictions
The US government’s downgrading of Mexico’s safety in May 2021 continues to hold back growth for its airlines.
“We have 80 aircraft that cannot fly into the US,” said Cuitlahuac Gutierrez, Aeromexico Senior Vice-President Institutional Relations. “We are keeping pressure on our government when we can,” he went on, noting that Mexico’s new civil aviation director is “more open to listening”.
Gutierrez is “quite optimistic” that Mexico’s safety rating will improve and rules will be lifted that prevent Mexican airlines from adding flights.
“It’s highly frustrating to have restrictions on travel and high fees,” said JetSmart Chief Commercial Officer Victor Mejia. “We have a government-owned airport, a government-owned airline [defunct Mexicana, being revived], and the government wants us to operate,” Mejia said. “We have to have the same competitive landscape to make this work.”