What about airlines in Colombia?

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Today we analyze what is happening with the airlines of Colombia that in a period of one year, there are three that have ceased their operations.

GCA – Great Colombia of Aviation was the first the first quarter of 2022, he followed Viva Air in February of this year and finally Ultra Air became the last Colombian airline to collapse and suspend its operations.

But, what is happening with the airlines Colombia? It is a great question that has been asked on social networks and multiple opinions have been generated around the reasons that have led to these closures.. From political factors to instability generated by some airlines are among the most repeated reasons, what's really going on?

Why do airlines close in Colombia??

Although there is no single correct answer, Today I am going to share my personal opinion based on previous experience covering the world airline industry for 16 years. This is what I think is happening:

1. Competition: The airline industry is highly competitive, and airlines that cannot compete with low prices and attractive service offerings risk losing customers and, possibly, have to close.
2. High operating costs: Airlines have high operating costs, which include fuel, Aircraft Maintenance, employee salaries, airport taxes and fees. If these costs exceed the revenue the airline generates, can go bankrupt.
3. lack of demand: If an airline cannot attract enough passengers to fill its planes, You will have difficulty generating revenue and covering your operating costs.
4. Financial problems: Airlines may face financial difficulties due to external factors, such as an economic recession or a pandemic, or due to internal financial mismanagement, such as accumulating excessive debt or investing in expensive but unprofitable projects.
5. Fuel price increase: Low-cost airlines often rely on fossil fuels like oil to operate their flights.. When oil prices rise, airline operating costs are also rising. If the airlines cannot increase their fares enough to cover the increase in costs, may experience financial loss.
6. macroeconomic problems: Airlines can also be affected by economic problems at the national or global level.. For instance, during an economic downturn, travelers can reduce their spending on travel and leisure, which reduces the demand for low-cost flights. Airlines can also be affected by issues such as changes in exchange rates and increased taxes..
7. operational problems: Low-cost airlines typically operate with a limited fleet of aircraft and staff., making them vulnerable to operational problems such as flight delays and cancellations. If operational problems become frequent, may negatively affect the reputation of the airline and its ability to attract and retain customers.
8. Usually, the airline industry is highly volatile and airlines are exposed to many risks, both internal and external. Those that cannot quickly adapt to changes in the market or that do not have the capacity to generate enough income to cover their costs run the risk of bankruptcy and failure to fly.

HIGH is pronounced

The Latin American and Caribbean Air Transport Association – HIGH expressed concern about what is happening in Colombia, where the following challenges for national airlines are highlighted, coinciding largely with what was said in the previous points:

• Rising fuel costs, which represents the 50% of operating costs.
• Increase in domestic costs due to inflation of 13,28% to February 2023.
• Strong devaluation that impacts approximately the 65% of airline operating costs.
• Different rates and contributions that are updated with inflation, How is the airport tax? (payment made by passengers to the airport for the use made by the passenger of the air terminals that is collected by the airlines), Stamp duty, air navigation services, among others.
• increase of almost 4 times sales tax (IVA), which is in 19% of the value of the ticket after a temporary reduction during the pandemic that lowered it to 5%.

What do you think? I also share another text where I expand this information:

Why does an airline go bankrupt??

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