ALTA’s Position on the Possible 200% Increase in the Carbon Tax in the Colombian Aviation Sector

The Latin American and Caribbean Air Transport Association (ALTA), a private non-profit organization dedicated to the development of aviation, an essential service in Latin America and the Caribbean, expresses its concern about the impacts of the possible 200% increase in the carbon tax, a measure included in the Financing Law recently presented to the Congress of the Republic.

“The increase in the carbon tax would directly affect the price of aviation fuel, which accounts for more than 35% of airlines’ operating costs in Colombia. This would inevitably raise the price of air tickets,” says ALTA’s Executive Director and CEO, José Ricardo Botelho. “It is a measure that may bring immediate revenue, but it results in a long-term impact on current and potential users of air transport in Colombia,” he adds.

Social Impact

In 2023, the net margin of the air industry in Colombia was only 1.36%, well below the average of 7.5% of the 1,000 largest companies in the country, according to a report by the Superintendence of Companies. “This financial scenario makes it impossible for airlines to absorb additional costs without impacting passengers,” Botelho explains.

In this sense, the increase in costs will affect the demand for air transport, especially among travelers who are undecided between using other means of transport or air travel, or even those who want to fly for the first time, as they are price-sensitive. Additionally, it will make cargo transportation more expensive, affecting the competitiveness of companies that rely on international trade and the final price paid by Colombians for products.

Colombia risks losing competitiveness compared to other countries in the region due to higher fuel costs, warns ALTA. “Colombia is missing a huge opportunity to continue democratizing an essential mode of transport, the safest and most efficient in the country. It is a form of social inclusion that is at risk,” Botelho adds.

Economic Impact

Additionally, an important productive sector for the country would be affected. The air transport sector supports more than 600,000 direct jobs in Colombia and contributes 2.7% to the total GDP, demonstrating its vital role not only in connectivity but also in job creation and the country’s economic development.

Air transport has shown sustained growth over the past two decades, increasing its contribution to the country’s GDP. In 2023, its contribution reached 0.71%, compared to 0.4% in 2005, highlighting its growing importance. From 2005 to 2022, the air transport GDP grew at an average annual rate of 6.8%, outpacing the Colombian economy’s average growth of 3.8%, according to DANE data.

Air transport has a multiplier effect: for every unit of added production, nearly 2 dollars are generated in the economy. This makes air transport a key driver for the country’s economic development, explains Botelho.

According to official data from Colombian Migration, 76% of the more than 4 million international tourists who visit Colombia do so by air, meaning that air transport helps generate 4.269 billion dollars in international tourist spending for the Colombian economy, according to ALTA, based on migration and the Central Bank of Colombia’s information.

Likewise, the country’s exports would be affected, as although only 0.3% of exports by weight are carried out by air, they represent more than 14% of the total value of exports.