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Can you lower the price of air tickets in Ecuador? An analysis of what can be done to achieve it.
The answer is yes, Ticket prices in Ecuador, both international and domestic, can be reduced.
For it, Some factors must change in our country to promote this important means of transport, which is a great economic stimulator worldwide.
In a previous issue we reviewed the Reasons that increase the prices of tickets in Ecuador and now we will see what can be done to lower them. There is so much to do, but it can be done if the will exists.
No to tariff regulation
Before going into details of what can be done, it is important to indicate that the market does not need or should be regulated (on the subject of prices) by any political or aeronautical authority to impose minimum and maximum prices.
World aviation works based on the basic rules of the supply and demand market, therefore, forcing airlines to operate with ceilings or minimums contradicts the self-regulation of the market and even, against what we could say, good practices promoted by IATA or ICAO.
Competition
The main factor that will allow the reduction of the costs of domestic and international tickets will be the arrival of new competitors.
In the international market we already have significant growth with the arrival of more and more airlines, increase in frequencies and capacity by those already operating. Therefore, if we search with time and following the recommendations to find cheap tickets, we will see that there is a reduction in costs to fly abroad.
in the domestic, a fourth or more competitors will make the market more dynamic, benefiting all airlines and above all, benefiting the user, who will see lower prices in promotions or basic rates and lower ceilings than the current ones.
The entry of new competitors does not affect current operators, otherwise, stimulates the market and more people will have access to lower and affordable rates.
Taxes
Each ticket that is bought in Ecuador, whether international or domestic, is taxed, specifically VAT to 12% that we know very well and although it is not significant in a rate of $50, on an international ticket $1.000 we are talking about $120 Dollars, that for a family of 4 people is a high cost.
Can anything be done with VAT? Of course, yes, and a good example is what is being discussed at high levels in Colombia., where it is under analysis to impose a differentiated VAT for the purchase of air tickets.
Another tax that is still in force and that should be modified is the one known as QB tax, which is an additional value to the 5% for fuel cost, which was implemented when the value of oil exceeded $140 per barrel, totally out of date today.
Internationally, it is essential to dismantle or completely eliminate the collection of $50 dollars per ticket issued in Ecuador with concept of the EcoDelta and also him Tourist Power for tickets issued abroad to our country.
Fees
The next item that users pay in a ticket is the fees, which are:
- security fee.
- Airport taxes.
It is a more complex issue, but not impossible to achieve. It must be taken into account that airport taxes allow air terminals to continue investing in infrastructure, search for new routes, technology and many others.
We can say that it is complex to carry out a reduction of the airport taxes that users pay in tickets, especially, at privately run airports, but it is possible and an example of this is what Chile has done in its main airport, Arturo Merino Benitez of Santiago, where to the 2020 will achieve a reduction in 40% of these direct values to the user, boosting air traffic and increasing revenue for it.
How low are the tickets!
This is the call that users use very often on social networks and it is understandable and even, necessary. Aviation worldwide is a great contribution to the economy of the countries and even more, Must be from access for all.
Lower costs in air tickets not only generates higher income for the industry, it also increases tourism and boosts the economy by generating more direct and indirect jobs, but there is much to do and much to continue improving.
Some steps have been taken, like the generation of incentives for airlines at airports administered by the DGAC and the JET A1 fuel subsidy in these, Open skies (potential elimination of ISD), But we must go further.
Everything that is proposed here is possible to do, but it depends largely on the will of all the actors in the industry, Government that provides attractive incentives and tax reductions for airlines and airports, tourism promotion, facilitation of procedures for the arrival of new operators, improvements in processes import of spare parts and much more.
We have made a first analysis of what can be done, although we can enter more technical issues that I hope to do in future deliveries, the important thing, it's possible.
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The fuel subsidy should be in all airports because they do not benefit private but all airlines for the benefit of passengers
That subsidy must be very well regulated to avoid abuses
I have doubts that these measures achieve the desired objective beyond issues such as VAT is a tax policy. Rates disappear but that does not guarantee lower rates. Greater competition may be but it has already been proven that it is not the long-term solution. The solution is the auction of routes and frequencies
If the rates and taxes proposed here were reduced, It is already in society and authorities to ensure the lowering of tickets, but without any doubt, the best way for this to be, is more competitive, no doubt about it.
Hi Nicolas,
What do you think of a post about credit cards allied to airlines? What are its benefits, differences and which one do you advise to get. Cup, American, United, Iberia, Avinaca and Latam have them with various financial entities in the country, but i think i need some. Sky Team is now the alliance with the largest presence in Ecuador (four member airlines, soon five with the arrival of AirFrance) and none of them offer this benefit.
Interesting, I will see what can be generated.
Totally agree
In addition to that, another security fee charged by airports is forgotten
The most serious thing is the VAT and also the ISD foreign currency exit tax that the airlines have to pay and that between VAT ISD are a matter of negotiation in open skies with several countries with the US at the head
Note that the new operation New York Guayaquil of the company Easter Airlines is pending these agreements
Airport taxes are the easiest to handle for both Tagsa and Quiport, as the volume helps them to do so
Hopefully success and with that lower prices