Source: ALTA
Air passenger demand is highly elastic, especially for tourism (which today represents more than 80% of regional travelers). Any variation in the fare to be paid reflects immediately and directly in the number of travelers. Therefore, what may seem like a few additional pesos in the final fare paid by users can tip the scales so that they switch from the safest and most efficient means of transportation to ground alternatives or opt for another destination where the airfare is more economical.
“Airfare is the great gateway to countries. Thinking systemically, it all starts with the search for tickets. If the cost is higher than other destinations, the passenger might decide not to travel or choose another place. It is a reality. Therefore, despite the efforts that operators in the region have been making for years to make their operating costs more efficient to pass those efficiencies on to users, we see a complex reality, which is the multiple taxes, fees, and charges that increase the final fare that passengers see and must assume”, comments Jose Ricardo Botelho, Executive Director & CEO of ALTA.
Argentina is the country that taxes air travel in the region the most, substantially increasing the price of the air ticket that the traveler must pay, sometimes even doubling the base fare that covers the air operation. A ticket issued in Argentina in pesos has a total of 7 taxes and fees, namely: airport use tax (USD 57), migration and customs tax (USD 10), security tax (USD 8), income tax (45%), country tax (30%), income tax withholding (5%) and the tax of the national tourism board (7%) + 25% Qatar dollar and now PSA tax, which makes Argentina the country with the highest tax burden for the passenger.
At the same time, Argentina has more than 22.4 million passengers per year (pre-pandemic), generating 329 thousands of direct jobs and 2.1% of the GDP.[1].
In Latin America and the Caribbean, we have countries that have reduced taxes on air transportation. Immediately the number of passengers begins to increase substantially, attracting more tourists, events, and businesses that generate consumption in the country: hotels, transportation, food, entertainment, services, and a long etcetera that generates jobs and income for the population and the country.
Raising the final fare increases the entry barriers to the country, the possibility for the population to travel in the safest and most efficient means of transportation within its borders and reduces competitiveness against other destinations that share the vision of facilitating the entry of travelers because they are convinced that the more passengers, the more dynamism to the local economy. As we know, aviation has long ceased to be a luxury and has become an essential service. It is the most inclusive means of transportation in society and a fundamental means of transportation in Latin America and the Caribbean. Economic logic shows that the less this sector is taxed, the more growth possibilities it has and the more development it generates in the country because more people are flying, infrastructure development, jobs, and social welfare.
This new tax further aggravates the country’s reduced competitiveness in attracting travelers who enjoy the rich culture, natural beauty, and business environment. This extensive value chain loses excellent opportunities to generate socioeconomic well-being for the population.
“Good practices and concrete examples demonstrate how balanced and efficient taxation attracts international and domestic travelers activates multiple industries and generates greater revenues for the State and the population. It is important to emphasize that aviation is one of the most aggravated industries worldwide. In Argentina, it is even more so,” adds Botelho.
Socioeconomic development comes not only from international travelers
The immense socioeconomic value of aviation comes not only from international travelers and tourists. The citizen who wishes to visit family and friends, the businessman who needs to travel to other provinces to generate business to support his family, and the person who needs urgent medical attention are some examples of domestic or cabotage travelers who require the essential service provided by aviation, especially in continental countries such as Argentina. Putting more costs is putting more barriers to an essential service.
Aviation has demonstrated a fundamental role in transporting essential goods, largely transported in the bellies of aircraft carrying passengers. Reducing the number of flights, operators, and routes would impact supply chains, especially for perishable and essential goods such as medicines, vaccines, and food.
ALTA reiterates that each country has the power to decide, and we respect it. Still, as a regional association representing nearly 80% of air traffic in the region, we feel obliged to warn about the challenge and the negative impact of increasing taxes on air transportation, which directly impacts the population. At the same time, we make ourselves available to the relevant authorities to provide data and technical support and bring regional and international best practices to contribute to the services received by the aeronautical activity efficiently and sustainably in a way that promotes the number of flights and passengers and generates more benefits for the nation. We hope the authorities listen to the industry connecting the country, bringing opportunities to remote places, promoting Argentine culture, and generating business.
Where there is aviation, there is development. Our commitment is to contribute to the region’s connection and access to aeronautical activity’s economic and social benefits.