CEOs of low-cost carriers proposed alternatives to improve competitiveness in the region

Cancun, October 27, 2023 - The top representatives of JetSMART, Sky Airline, Wingo and Flybondi agreed that aviation is a necessity, not a luxury, and that it contributes to boosting countries' economies and generating more inclusion. During the 19th ALTA AGM & Airline Leaders Forum, hosted by the Latin American and Caribbean Association (ALTA), the executives highlighted the importance of having smart regulations.

The panel moderated by Emilio Romano, CEO of Bank of America Mexico, featured the participation of Estuardo Ortiz, CEO of JetSMART; José Ignacio Dougnac, CEO of Sky Airline, Eduardo Lombana, CEO of Wingo and Mauricio Sana, CEO of Flybondi, who shared their experiences on how some government actions have boosted the aviation sector, while others have slowed it down.

Eduardo Lombana, CEO of Wingo, explained that the reduction of the airport tax, from US to less than US in Cartagena, boosted tourism in the city and when Colombia decided to lower the Value Added Tax (VAT) on air tickets, from 19% to 5%, it was one of the countries that recovered the fastest after the pandemic, achieving 48 million passengers. However, the return to 19% VAT caused airline bookings to contract.

"I think we have a task and a long way to go. We must continue to market aviation to our governments as a social dynamizer. The great contribution of aviation is that it makes it possible for small businesses and entrepreneurs to access air transport and visit places they never thought of visiting before," Lombana said.

The CEO of Wingo raised the need to undertake an initiative as a guild in order to make a progress from what was achieved with the Montreal Agreement (held on May 28, 1999, for the protection of passengers, luggage and goods on international flights), which unifies regulations on passengers.

"I think we have to start to see how we can make this issue of passenger rights and duties much more homogeneous, which in Latin America is hurting us so much, we have so many regulatory differences between countries that really, after all, what they do is slow down the industry."

Meanwhile, José Ignacio Dougnac, CEO of Sky Airline, explained that in 2018 a significant reduction on airport taxes on the Santiago-Mendoza route, achieved through an agreement with the governments of Argentina and Chile, significantly increased traffic between those destinations, generating higher tax revenues and opening up business opportunities between the two cities.

"We could think about doing this by integrating Latin America much more into their economies. There are great opportunities if we manage to have a long-term and State vision, to develop an aviation similar to the one that countries in Europe have today."

Dougnac said that the region and the aviation sector require the promotion of policies that transcend the governments in power. "We have to try to work with the States, not with the governments that are in power at that moment, to have a policy that allows us to advance in the long-term towards an aviation that provides people with access to be able to really be transported."

He also highlighted the importance of making the right investments in airport infrastructure.

"If we make the right investments we will definitely go in favor of consumers, in favor of the countries' connectivity, of the economies, of the generation of resources for the economies themselves. So, having a long-term vision and getting good public-private coordination can make all the difference in 15 to 20 years. In Latin America there is a huge potential to strongly develop not only tourism, but also business between LA countries, which today is much more complex than business between European countries."

Aviation is a necessity, not a luxury

Mauricio Sana, CEO of Flybondi, said that for Argentina they are working to demonstrate that it is possible to boost the economy and the aviation industry based on passenger traffic.

He added that in regions such as Latin America, which has three very strong mountain ranges that make land transport difficult, aviation becomes a necessity, not a privilege. "At Flybondi we are trying to get out of that framework where aviation is tourism, tourism is part of air transport, we are working hard on it and as a result, in the midst of a lot of difficulties, we are making a little more contribution, a little more support to the regulation of governments, provinces, economies and we are starting to listen to each other; that is the model of the future that we have achieved."

The CEO of Flybondi stressed that the airline works on inclusion, which has resulted in today over 4 million people being able to fly for the first time, especially entrepreneurs and representatives of small businesses. Sana proudly highlights that out of those over 4 million, half of them have flown Flybondi for the first time.

Open Skies

Estuardo Ortiz, CEO of JetSMART, highlighted the importance of open skies.

"If the plan is to develop more regulations to improve competitiveness, I think the first thing is to have more competition, to break down the barriers that do not allow you as an operator in country A to operate as a domestic in country B. Open Skies is what we should have signed up to a long time ago in the region. We are still facing the situation that in order to fly in a country we must have pilots of that nationality. We will all be in favor of regulations that benefit safety, but those regulations in today's global world, where you want access to human capital, really limit us a lot; also, the possibility of still having to deal with bilateralism.”

Ortiz proposed that ambitious public-private projects be considered in each country. "We may not be able to homogenize everything, but at least start with two or three countries in a bilateral agreement that will allow us to move closer to that goal. Today, there are countries in South America where the boarding tax is 5% of the minimum wage and others where such tax reaches 49% of their minimum wage."