Only 0.45% of Latin Americans travel by air annually

31-10-23

IATA attributes this low figure to high tax rates and lack of competitiveness. Despite the post-pandemic recovery, airlines still project losses in the millions.

Although Latin America is the region of the world with the best levels of recovery of the airline industry with respect to the pre-pandemic period, the cash flow of the companies operating in this area of the world does not seem to be recovering at the same level.

The International Air Transport Association (IATA) projects that Latin American and Caribbean airlines will lose US$1.4 billion this year.

This means that they will lose around US$4.92 per passenger they carry and, according to IATA, the problem is that the high demand for travel has been counterbalanced by a volatile and difficult macroeconomic environment for companies, especially on this side of the world.

While it says that airlines with a presence in Latin America struggle to offer competitive fares, in the meantime they must contend with taxes, fees and charges, as well as the bus sector which, in its view, is a less regulated and taxed mode of transport. Read also: In two months, Almacenes Éxito shares grow 18% in the New York Stock Exchange.

At the Alta AGM & Airline Leaders Forum held in Cancun, Mexico, executives of the most important airlines in Latin America met to analyze these problems that hinder the sector's progress. In an over-diagnosis, they mentioned the high taxes -which can weigh 50% in the final value of a ticket- and the few advances in infrastructure, among others.

It is worth mentioning that IATA calculates that in Colombia the cost of a ticket for a domestic flight has risen 19% on average this year, while international flights have increased 4.5%.

The situation directly affected important low-cost airlines whose businesses were not sustainable and ended up going bankrupt, such as Viva or Ultra Air in Colombia, and others in the region such as Interjet in Mexico, or Equair in Ecuador.

Although the sector continues to move millions of passengers a year, a shocking fact is that in Latin America only 0.45% of the population travels by air at least once a year. Likewise, globally, close to 80% of people have never been on an airplane.

When asked about this, Avianca's CEO, Adrian Neuhauser, said that another relevant point is that governments must allow each airline to carry out its business model, because if low cost airlines are not given the possibility - for example - to sell a differentiated product, and are forced to "give luggage for free" or include wifi, the option of making a difference is being taken away from them. Read also: P&G Summit in Cartagena: 'Pact for Energy Security' proposed.

In turn, Roberto Alvo, CEO of Latam Group, stated that in airports such as El Dorado, in Bogota, there are problems with "simple solutions", but that they have not been accompanied by public policies. In his opinion, the airline industry's biggest challenge was not Covid, but will be decarbonization, which more and more travelers are demanding, but which in Latin America is impossible to advance at the same pace as in Europe.

According to José Ricardo Botelho, CEO of the Latin American and Caribbean Air Transport Association (ALTA), today 60% of airline costs are in dollars, and the way to solve the industry's major problems is for aviation to become a state policy. In this case, Brazil is the best example, as it went from moving 20 to 100 million passengers after a public-private partnership.