Maintaining the 19% VAT on air tickets affected 4 large airports in the country

The airline market was hit hard by the VAT increase to 19% in 2023, after remaining at 5% after the pandemic. According to estimates by the International Air Transport Association (Iata), if it had been maintained, Colombia could have had a total of 7 million additional passengers last year.

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Of the total, 4.46 million passengers is the potential loss in the domestic market as a consequence of the increase in VAT on air tickets. According to IATA, although the main impact was the increase in the tax burden, it also affected loss of purchasing power due to inflation and the increase in ticket prices after the departure of the two airlines Viva and Ultra Air that operated, above all, the domestic market.

The remainder, that is, the 2.25 million passengers correspond to the international market. This, despite the good performance and growth potential of international flights to Colombia. According to IATA projections, uThe international market would have grown by 10% having maintained VAT at 5% on air tickets.

“This reduction would have further enhanced the good performance of the international market in recent years,” says the report.

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Although tourism has shown positive behavior this year, passenger arrivals on domestic flights have decreased at some of the country’s main airports, which in turn serve destinations with great tourism potential.

Some of the airports most affected by this situation are Simón Bolívar in Santa Marta, which by January 2024 decreased the number of passengers by 22.4% transported with this destination compared to the same month of 2023. This is followed by the Rafael Núñez airport in Cartagena with a drop of 9.9% in passengers transported, and the Alfonso Bonilla Aragón, in Cali with a drop of 8.1%. %.

Another of the airports affected is José María Córdova, in Rionegro (Antioquia) with a decrease of 20.9% in the same period. If 2023 were compared to 2022, the decrease in passengers transported is 10.2% in the second most important terminal for Colombian air transport, going from 13.2 million travelers to 11.8 million.

“Aerocivil began updating the master plan of the José María Córdova airport (MDE), which must be completed in the second half of 2024. This update will allow identifying opportunities to improve the aeronautical and airport infrastructure to meet the growing demand for passengers and cargo. The airlines, in close coordination with IATA, have participated in the meetings scheduled by the aeronautical authority and the consultant, so that the needs and recommendations of the industry are considered during the development of the plan, for the benefit of service levels and investments that allow sustainable growth of the sector and improve the travel experience”, said Paula Bernal, IATA country manager Colombia.

For Bernal, The scope of the update will allow us to reach the pre-feasibility phase, which represents a significant advance in the possibility of executing the master plan in a timeline of 20 to 30 years, and whose execution will serve as a catalyst for tourism in the northwest of the country.

However, today, thanks to the conservative decline in inflation and the arrival of new airlines to the country, the price of tickets, which reached historical highs in 2023, They have lowered their price by 17%.

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Airline tickets.

Among other reasons, the balance of costs of Civil Aeronautics revealed that it was due to a 10% decrease in them during 2023, a very different result compared to 2022 in which they rose 40%.

In the case of direct costs, these fell 12% ($2.86 million less), while a year ago they grew 51%. When looking in detail, the report revealed that the largest variation for the second half of the year was that of passenger services, with an increase of 17.4% (with a weight in the basket of 2.8%), while the cost average was $654,608 in 2022, a year later it was $768,330. This value is followed by crew costs, which grew 13% (and a weight of 7.5%), going from $1.79 million to $2.03 million. In third place was the 10.6% increase in maintenance costs (which have a weight of 15.4%), which by the end of 2022 were $3.76 million and became $4.16 million .

Fuels, which weigh 35.1%, the item with the greatest participation in the cost basket, had a negative variation of 24.3%, going from an average cost of $12.51 million to $9.47 million, a great relief to the companies’ balance sheets. Among the reasons for this dynamic, they explain that it was “incentivized by the entry of new A320 NEO aircraft with better technology that allows a 15% saving in fuel consumption.”

However, he considers that for the remainder of 2024, one of the main challenges for the sector is to promote tourism in the different regions of the country and prevent the indicators from continuing to fall. For this, he sees it necessary to review the tax burden on tickets. and thus boost the economy.

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“The airline sector is a driving force of the economy and plays a fundamental role by being one of those responsible for generating the necessary connections so that other sectors of the economy can establish, operate and grow. For these connections to flow and be dynamic, especially in the regions, it is necessary that costs be reduced, and thus open greater possibilities for users,” Bernal points out.

And adds: “We are making an effort from the private sector, which would complement very well with a public effort to have a legal framework, specifically tax and charges, that takes into account the nature and importance of this service, so that users can benefit of better prices.”

PAULA GALEANO BALAGUERA
Portfolio Journalist