Colombia is facing impacts that reduce the growth capacity of air passenger transport
ALTA calls on the Colombian Government to make decisions to promote an essential service for the population and a sector that creates millions of jobs
March 30, 2023
March 30, 2023 – In January 2023, domestic air passenger traffic decreased 1% compared to 2022, a sign of the downward trend that Colombia could have in 2023 if measures are not taken in a timely manner.
The drop in the domestic passenger traffic is mainly explained by an increase in the final price of tickets. Such prices have been impacted by:
- Increase in fuel costs, which represents 50% of operating costs.
- Increase in domestic costs as a result of 13.28% inflation as of February 2023.
- Strong devaluation that impacts roughly 65% of the airlines' operating costs.
- Different fees and contributions updated with inflation, such as the airport fee (payment made by passengers to the airport for the use of the air terminals, which is collected by the airlines), stamp tax, air navigation services, among others.
- Increase of almost 4 times the sales tax (VAT), which is now at 19% of the ticket value after a transitory reduction during the pandemic that lowered it to 5%.
Most of the factors are not controllable, such as the international fuel price, however, the national government has the capacity to act in terms of taxation, which significantly impact the final price.
ALTA's CEO, José Ricardo Botelho, shares: "Colombia was the first country in the region to recover its pre-pandemic levels. Colombia's domestic passenger traffic recovered in November 2021, while the second country in the region to recover such levels was Mexico, 6 months after Colombia. Peru did so one year after Colombia. Argentina did so by January 2023. Brazil, Chile and Ecuador have not recovered their pre-pandemic levels by January 2023. Colombia's rapid recovery was not by chance. It is largely due to the VAT reduction, which generated greater access to this essential service for the population. Colombia was the only country in the region to implement such a policy and, therefore, it was the first country in the region to recover its pre-pandemic passenger traffic levels."
Colombia is going through a special juncture in terms of air transport. It is a critical moment to implement a State Agenda that prioritizes air transport and, thus, the connectivity, jobs and socioeconomic development it generates for the country. Not only because it is the most efficient and safe means of transport, but also because it is a powerful economic activator that provides opportunities for the entire population. More connectivity and more travelers generate a greater demand for hotel services, taxis, restaurants, services that in turn generate taxes, so the economy as a whole will generate higher tax revenues. In this sense, Colombia's Ministry of Transport has requested Congress to reduce the VAT tariff at a time when a bill called the National Development Plan is being discussed. Colombia is the second country in the region with the highest ticket sales tax (VAT). Countries such as Brazil and Chile do not have such taxes.
"Colombia is at a critical moment and it is necessary to work together in order to strengthen the connectivity of the country, a fundamental service for the population and to create millions of direct, indirect and induced jobs in a nation that demands efforts in terms of employment, considering the great impact of tourism on the Colombian economy, which currently has a 13% unemployment level," Botelho points out.
