Why are airfares so expensive in Ecuador??

¿Becauseé the tickets are so expensiveéprisoners in Ecuador? A question that is trending on social networks and that has had a strong impact.ón in traditional press media. En is fasting, we will try to answer this question so that anyone can understand the reason for these apparent, high ticket priceséprisoners in Ecuador, explained in a simple way and without falling (we wait) in techísms.

We are not going to talk about RASK, Yield, ASK o ASM, that couldíWe analyze at another time or situationón to clarify más técynically this topic.

¿Becauseé It is so expensive to fly in Ecuador?

First, We must understand that the aviation industryón is not an industry likeúnot comparable with e.g., the fare of an urban bus from any city in Ecuador that costs from $0.25 d centsólar up secún the route and distance.

Transportation toéreo is a complex business, full of torqueámeters, variables and factors external and internal to the industry that daily affect the base cost of a ticket to any destination.

Now that we have indicated that it is a complex business and full of torqueámeters, We are going to talk about some factors that influence the determinationón of costs:

• internal factors
  • Market objectivesécynical
  • marketing strategies
  • operating costs
• External factors
  • Market and demand
  • Competition
  • Other factors (petr priceóleo, market rules and others)
• structural factors
  • populationón
  • Distance between cities
  • Alternative means of transportation
  • Roads or infrastructure

These factors are fundamental to understand the prices of tickets in a country.íto rule itón. Although it mayíWe analyze other determining factors, It is important to know that some of the main factors that determine the price of a ticket are: market and demand, competition, petr priceóleo and fixed costs. An additional factor that raises prices, are the taxes.

Mercado

As we have seen and it is of knowledge público, in Ecuador there are only 3 aerolíneas doméstatic operating. Although we are a país smallñO, its populationón is numerous with más de 16 millions of inhabitantsún census of 2015, but these are not más de 3 millions who fly.

Comparádoing it with othersíses, like Chile, which is very similar in population to Ecuador, but with higher purchasing power and a marketéreo más fromámonkey, we are atñthe light. Chile has más de 17 million and a half inhabitants, but with the same núaerosol grouperíNeas flying doméstically. ¿So whaté happens?

In Chile during the 2017 almost flew 6 million passengers, twice as much as Ecuador. By theñThe Chilean market was dominated by LAN Chile (now LATAM) and far behindás Sky Airline, but in the úlast 2 añthe panorama changedó. Sky evolucionó a low cost y llegó a new aerosolínea ultra low cost llamada Jet Smart, that in just 1 añor operations and transportó 1 millónumber of passengers, really incredibleíble.

Then, in Ecuador and Chile there are 3 aerolídenies, ¿thaté happens? La situationón is going through stagnation in the Ecuadorian market, that for almost 10 añor have the same airlines operatingídenies, that in one way or another have imposed their conditions and that has been generated by market conditions, they have not done any bad práctic, the market has allowed it.

Keep the same aerosolsíneas indirectly generates that demand is affected, since there is no dynamism that más competition generateíhow the creationón of new schedules or new internal routes. They control the supply, raising or lowering the seating capacity per route or frequencies according toún market fluctuations.

Remember that sí there have been other aerosolsílines in Ecuador that have taken off, but flown for short periods, but due to their own administrative problems they have had to close and not because of the airlines.íestablished.

It's not bad to have 3 aerolíneas sófair and recognized sunéstically, in fact it is excellent for the user to have aerosolílines known and that remain over time, but the rules bácompetition and demand factors, spaghettién tell us that in a market dominated by the same operators for a period of time generatingá a kind of stagnation. same routes, frequencies and destinations make the airlinesícurrent lines compete on equal terms, but without risk.

In Ecuador there is market control, that can only beá break up allowing these same aerosolíplans to exploit new destinations and with the arrival of new competitors, but these new competitors mustán be strong, in order to maintain its operationón and compete against 3 aerolíneas máyes how strong.

Más competence obligeá to the airícurrent ways to improve your processes, be more efficient, but above all, lower your costs so as not to lose market, since it is known, that when a major new competitor enters a market, rates are reduced más of a 30% and the market grows by núvery similar passenger grouper.

Price of petróleo and operating costs

It's a seesaw of emotions. It is said that the price of petróleo, themselvesún the aerolínea, aviófor wallís can affect an important part of the price of a ticket toéreo. Ecuador is affected like the rest of the world by these ups and downs, although its influence is not necessarily strong, drives costs up.

When the petróleo low, prices will not necessarily go down, since the aerosolícompanies cover their operations with this extra income, thinking about the future for complex situations in the market or their operation.ón.

Our fatherís has subsidy combustible JET A1 for airports managed by the DGAC and municipal of Cuenca until 40%, what caníto benefit the user, but not always beá así as we already explained. It should be remembered that this benefit was not extended to Quito airports, Guayaquil and Galápaid.

A key point that affects the final cost of a ticket, are the operational and administrative costs that the airlinesípoints they have and allows them to determine whatáHow much does a ticket cost between 2 points to cover these values. Wages, leases, maintenance of mobilization equipmentón, office furniture, structure, maintenance workshops, spare parts and  others generate a high operational cost for the airlineínea, that in Ecuador with the policeíethics of for example importationónumber of spare parts, generates an increase in costs and time, that in the long run will be seenán reflected in what the user pays.

Taxes

Taxes are a very long topic to detail or to try to understand their high margin in a domestic passage.éstico in Ecuador. You must indicate that there are taxes (IVA, Eco Delta $50 dólares in international tickets issued in Ecuador), Tur Powerístic, etc) and airport taxes (what a passenger pays for the use of an airport, security, firemen, ATC, etc.)

For instance, if we quote a round trip ticket between Quito and Guayaquil with any aerosolíwe will see this breakdown:

• Rate (what Aerol takes in silveríne and where to getá its profitability) It is $40 dóhomes.
• Taxes (IVA, rates, security, etc) It is $35 dóhomes.

The total beingían $75 dóhomes, without the taxes we are talking about $40 dólares round trip, a rate that is undoubtedly attractive and generateíto an increase in demand. Of course, taxes must exist, but the idea of ​​this point is to inform that the cost of a ticket, themselvesúin anticipationón of purchase is a 55% actual cost of the ticket and 45% taxes.

¿Becauseé the tickets are so expensiveéprisoners in Ecuador?

With exercise rárequest made in the segment above, we can see that a passage is not alwaysá so expensive and a cost of $75 dólares is más that acceptable for our país, but those costs are often far away for mostíthat of users, although in paíneighbors, a half-hour flight can cost about $40 round trip, It is the current reality of our countryís.

The tickets cost más de $400 dólares as many times users have complained, but that is due to the families rateías with which legally the aerosolsíbuses sell tickets. A fare family is a kind of variables that are usually represented with letters Y/C/W/X/AA or other. These families allow the user to access various options and benefits such as promotional rates, rates with más bags or fees úlast minute. Emphasize that this práethics is global and backás the way to operate at a low cost úunique in all the seats on the planeón.

Families rateías they allow the airlinesíaims to optimize your income and offer various alternatives according toún the needs of each user.

Definitely, a fee úlast minute will beá más expensive than one bought months in advanceón. Spaghettién, the aerosolsíairlines manage their income by offering más cheap, which means that an avión of 100 passengers will haveá very low rates in 20 seating, while the rest of 80 seats are distributedá between the various rates available and the fewer available seats left on the planeón, the rate that you have to buy, to beá más high.

With all that we have analyzed, Tickets in Ecuador are expensive due to lack of new competition that stimulates the market, regulate rates and generate an increase in supply. Taxes represent a large percentage of the value paid by the user, making a ticket more expensive, that with agreements between the State and administrators it will be possibleíto be reduced to encourage the market along with incentives for private administrators by the Government.

Along with the price of petróleo and the fixed costs of aerolílines generate the current prices that users pay.

Definitely, the main factor is competition, with the arrival of más strong operators, prices go downán, for the benefit of the user, tourism and hundreds of jobs that the activityégenerated area. Even, with the operación of other flight equipment can go back to current or new ones, más efficient in the management of their structures and that will be seeníreflected in better rates, without reaching an operationón low cost.

Equally, It does not depend only on the aerosolsílines and competition, if taxes are high and prices fall, we will end up paying más in taxes than in the cost itself that the airlines charge usídenies.

There are hundreds of factors that determine a cost, even that Ecuador isé dollarized, but I have tried to focus on the main ones and más important for this análysis thought of the púwar in general.

*Clarificationón: the objective of this publicationón is to inform in a way fáeasy and clear whyé the costs of a ticket in Ecuador, if errors were made in use of terminologías economic conceptsía, the apologies of the case. I like itíto know the opinionón of the aerosolsígirls about this postón and his point of view.