He air market was hit hard by the rise in VAT at 19% in 2023, after remaining at 5% after the pandemic.
According to estimates of 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.
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According to the IATA, Although the main impact was the increase in the tax burdenalso affected the loss of purchasing power due to inflation and the increase in ticket prices after the departure of the two airlines. Live and UltraAir that they operated, especially 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, the international market would have grown by 10% if VAT had been maintained 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 airportswhich in turn serve destinations with great tourism potential.
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Some of the airports most affected by this situation are Simón Bolívar in Santa Martawhich for January 2024 decreased by 22.4% the number of passengers transported to this destination compared to the same month of 2023. This is followed by Rafael Núñez airport, in Cartagenawith a 9.9% drop in passengers transported, and the Alfonso Bonilla Aragón, in Caliwith a drop of 8.1%.
Another of the affected terminals is the 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.“, said Paula Bernal, Colombia country manager of IATA.
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In his opinion, “This update will identify opportunities to improve 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”.
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For Bernal, The scope of the update will allow us to reach the pre-feasibility phasewhich 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 reduction in inflation and the arrival of new airlines to the country, the price of tickets, which reached historical highs in 2023, has dropped by 17%.
Among other reasons, Aerocivil’s cost balance revealed that it was due to a 10% decrease in costs in 2023a very different result compared to 2022, when they rose 40%.
In the case of direct costs, the drop was 12% ($2.86 million less), while a year ago they grew 51%.
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When looking in detail, the largest variation for the second half of the year was that of passenger serviceswith an increase of 17.4% (with a weight in the basket of 2.8%), while the average cost 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 at the end of 2022 were $3.76 million and became $4.16 million.
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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 relief in the results of the companies.
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It is urgent to review the tax burden
Paula Bernal, Colombia country manager of IATA, believes that for the remainder of 2024, one of the challenges of the sector is to promote tourism in the regions and prevent indicators from continuing to fall. For this, he sees it necessary to review the tax burden on tickets, and thus encourage the economy.
“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.“, said.
PAULA GALEANO BALAGUERA
Portfolio Journalist
