At the Aviation Festival Americas 2018 event held in Miami from May 8th to the 9th, international consultant Mr. René Armas Maes moderated the Airline CEO keynote panel focusing on challenges and opportunities in Latin America, a region that is expected to double its passenger traffic by year 2035. In this occasion, Mr. Declan Ryan, Executive Chairman of Viva Air Group and Mr. Holger Paulmann CEO of SKY Airline joined the panel.
The panel discussion focused on the importance of communicating benefits and economic impact air transportation brings to a country, its economy and getting that message across effectively to governments, airport groups, airlines and service providers such as fuel and ground handlers. In addition, concrete examples that led to traffic stimulation and air connectivity improvements where discussed including Cartagena airport in Colombia which last year reduced its airport tax by 50% stimulating a 38% increase in international traffic. Furthermore, regional developments related to multi-brand business models led by full-service carriers such as the case of Copa Airlines Low-Cost subsidiary Wingo Airlines and potentially to be launched LATAM Airlines Group Low-Cost subsidiaries in Chile and Argentina were discussed. Finally, the impact of potential consolidations among current and new Low-Cost (“LCC”) and Ultra Low-Cost (“ULCC”) carriers in the region were commented.
“Viva Air is going into its 6th year of operations and we have proven that there is a LCC market in Colombia and Peru, but it hasn’t been easy to implement a no-frills business model in the region. In addition, we see many obstacles ahead including airport infrastructure and high taxes that are preventing us from growing as fast as
we would like to, especially with the 50 new aircraft that will start arriving this year” said Declan Ryan, Executive Chairman of Viva Air Group.
Today, government taxes, limited or absence of sound air transportation strategies in many countries and airport demand planning models that are not up to speed with near and medium terms airline capacity and traffic grow represent significant barriers for carriers to reach their maximum potential in Latin America.
“We have been able to outgrow the market by more than 50% over the past few years. It is becoming evident that airport taxes are the main roadblock in the medium to long term, but in the short term in many markets we are operating and evaluating to expand it certainly is the restriction of airport capacity” said Mr. Holger Paulmann CEO of SKY Airline.
Likewise, Latin America has one of the highest aviation fuel costs when compare to peers including Brazil that applies a 12% jet fuel tax which remains an expensive place in the world for airlines to operate, limiting traffic growth and preventing potential passengers including current ground transportation customer from travelling by air. In addition, many countries in the region apply taxes on airfares which average 18%. Moreover, airport fees are also high in the region when compared to other global peers.
“By improving air connectivity and access to air transportation, both trade and tourism traffic increase, which accelerates GDP growth and optimize fiscal income for governments. In addition, there are many global examples showing that when countries lower restrictions that prevent many to fly today, it translates to improved economic conditions for its people and higher GDP per capita which stimulates spending and ultimately creates jobs. Furthermore, government and industry fees need to be revised vis-à-vis traffic stimulation scenarios that could
potentially lead to top and bottom line growth for all stakeholders involved. Finally, a more business oriented regulatory environment needs to be adjusted to reflect current market dynamics and operational reality”, said Mr. René Armas Maes, Managing Director at Jet Link International LLC and Chairman of Aviation Festival Americas.