Dear Industry Colleagues,
While the summer is in full swing and the busiest operational time of the year for our airlines, some recent geo-political developments are worrisome and potentially threatening the growth of our industry. After decades of globalization and the opening of borders, recent trade policy developments – most notably to date between the US and China – have begun to unwind this position. IATA released a research note looking at the impacts of an escalation in tariffs on the air transport industry, summarized in the below graphs. Our overall conclusion is that, at this stage, the impact of the current trade skirmish on the air transport industry is likely to be relatively moderate. However, further escalation could result in a much more material impact on both cargo & passenger demand. While a full-blown global trade war does not form part of our central outlook, it represents an important risk.
Besides the fear of trade wars, we continue to see both negative and positive regulatory developments in the region. In Brazil, the senate approved a bill to prohibit airlines from charging for seat assignments which goes against global best practices and the proven concept of letting airlines offer a cheaper fare to those who do not wish to pay for their preferred seating. We are working closely with ABEAR and the industry to lobby against this initiative. On a positive note, Argentina removed the minimum fare requirement for domestic tickets as of September 1 so that airlines can offer lower prices to compete with other modes of transportation. In addition and also effective on September 1, Argentina’s National Airports System Regulatory Body ORSNA announced that airport concessionaire AA2000 will be banned to impose a 10% fee on all contractors and suppliers working for airlines at the airport which is another step in the right direction by the Argentine government.
With these challenges and opportunities on the horizon, our work of advocating the economic and social benefits of aviation to governments remains crucial, especially in countries that held recent elections. I am therefore pleased to share that we will hold Aviation Days in San Jose for Central America on September 19, in Bogota for Colombia on October 4, and in Mexico at the end of February 2019.
As usual, please find the summary of IATA’s key activities across the Americas in July below and please let me know if you have any questions or would like us to take further action.
With kind regards,
Peter Cerdá, IATA’s Regional Vice President, The Americas
Argentina: Confirmation of Cost Reductions by ANAC
On July 20, Argentina’s National Civil Aviation Administration (ANAC) issued Resolution 530/2018, putting on hold the increase of overflight and landing support fees for international flights approved earlier this year of +1.5% and +2.3% respectively. This measure complements the previously announced tariff reduction of 3% for services provided to international airlines by ground handling service provider Intercargo, approved at the beginning of July. Both measures were first announced by Argentina’s Minister of Transport Dietrich at IATA’s Wings of Change conference in Chile in March and represent the commitment of Argentina’s authorities to continue fostering industry development and to reduce the cost gap between Argentina and the rest of the region.
Argentina: Elimination of Domestic Ticket Price CAP
Argentina’s Ministry of Transportation announced that the minimum fares for domestic flights will be eliminated with effective date of August 15 and will apply for all round-trip tickets sold within 30 or more days in advance, supporting a stronger deregulation of the market in Argentina. Price bands were first established in 2000 and the current administration removed the maximum fare in 2017. IATA supports this decision as it is a further sign of the intention to reduce State intervention within the airline industry and supports Argentina’s government goal of doubling the number of passengers flying inside the country by 2019.
Brazil: Adoption of IATA Cargo XML
IATA worked with Brazil’s National Airport Authorities Commission (CONAERO) to adopt IATA Cargo-XML messaging as standard for air cargo processes in Brazil. The standardization of electronic communication between airlines and other air cargo stakeholders such as shippers, freight forwarders, ground-handling agents, regulators, as well as customs and security agencies, via IATA Cargo XML, will further modernize Brazil’s air cargo business, enhancing efficiency, driving trade growth and maximizing safety and security across the country.
Ecuador: Public Private Working Group to Address Industry Concerns
An initiative between IATA, ALTA and the local BAR ARLAE, to create a public-private high level working group to address the most important topics in aviation in the country was well received by the government of Ecuador. The working group will be chaired by the Minister of Tourism and will include the Ministers of Finance, Commerce, and Transport, the Civil Aviation Director, as well as other authorities. It will address the four key priorities for our members in the country, which are 1) the elimination of the 5% currency repatriation tax, 2) the reduction of the aviation fuel tax, 3) the reduction of the tourism tax, and 4) bringing the country’s API data sharing program to comply with international standards.
Costa Rica: New Tax Law to Increase VAT on Airline Tickets under Discussion
A tax reform is under discussion in the National Assembly of Costa Rica. The bill initially included the introduction of a 13% VAT on all tickets with origin/destination Costa Rica. After advocacy efforts of the industry, tickets were included under a tax classification with a reduced VAT rate. As a result, the airline industry will be subject to VAT but at a reduced rate of 0.4% of the total price of each international ticket. IATA will continue its advocacy efforts on behalf of the industry while the tax reform is still under discussion.
Panama: 1st Country in Latin America to Implement Transparency in Payments (TIP)
Transparency in Payments (TIP) is an IATA industry initiative focused on providing airlines with increased transparency and control in the collection of their sales through the travel agency channel. At the same time, it will enable travel agents to take advantage of new forms of payment for the remittance of customer funds. On July 1, Panama became the first country in Latin America to implement TIP. The roll-out of this initiative has progressed so far as per original roadmap and the countries to follow Panama are Honduras, Belize, Costa Rica, Guatemala, El Salvador and Mexico – all planned for the second half of 2018. In the mean time, IATA continues to engage with all airlines from the Americas region to ensure their readiness for NewGen ISS (including technical readiness for IATA EasyPay) and TIP. In parallel, IATA is delivering educational workshops for travel agents to clarify any questions and prepare them to take advantage of the benefits that NewGen ISS and TIP will offer, especially on new accreditation models and new methods of payments that will become available in all BSPs.
Venezuela: New Currency Implementation to Fight Hyperinflation Postponed Again
Venezuelan President Maduro announced on July 25 that the replacement of its currency, the Bolivar Fuerte (VEF), for the Bolivar Soberano (VES), will be postponed to August 20 instead of August 4. This is the second time the implementation is postponed, since it was originally slated to begin on June 4. The government also announced that, in order to fight hyperinflation in the country, the new currency would be equivalent of 100,000 VEF per 1 VES instead of the original 1,000 VEF per 1 VES. IATA will continue to work closely with the local BAR and the authorities to ensure that airline systems are in place to adapt to the change in currency.
Regional Security Strategy Update at ICAO Aviation Security Conference
During the ICAO Regional Conference on Aviation Security for the Americas and the Caribbean in Panama, July 24-27, IATA outlined the industry’s willingness and wish to collaborate with States, ICAO and other interested parties in meeting the key priorities outlined in the Global Aviation Security Plan (GASeP). IATA highlighted the role of the IATA Americas Security Focus Group and detailed how IATA, through this is group, is already meeting GASeP responsibilities and described the group’s action plans for the future, both globally and in the region, resulting in positive feedback from airlines, ICAO and numerous States.
Americas Focus: Archive