Why regulating airfares is a setback?

regulation air rates tickets air tickets fares Ecuador domestic flights high price taxes taxes why it is so expensive IATA HIGH negative effect why not

✈️ Exclusive Benefits for Readers

Verified codes to save on your next trip.

5% OFF
Travel insurance

International insurance to travel around the world.

NARENAS
5% OFF
Discount on chips

International e-sim for travel around the world.

NARENAS
5% OFF
Car rental

Rent your car with a discount everywhere.

NARENAS

¿Precios altos en vuelos domésticos en Ecuador? Regular las tarifas aéreas no es el camino para que los pasajes bajen, sino bajar impuestos e incrementar oferta.

El actual contexto de alta demanda y baja oferta en el transporte aéreo de Ecuador ha generado comentarios sobre los precios de los pasajes y ha revivido la propuesta política de regular las tarifas, estableciendo máximos o mínimos. Nevertheless, Peter Cerda, Regional Vice President for the Americas THERE IT IS y CEO de HIGH, advierte que esta intervención estatal tendría un efecto devastador.

La perspectiva de la industria es clara: la regulación no solo no resuelve el problema de los costos, sino que lo agrava.

El impacto negativo de ponerle un tope al precio

During the ALTA Forum realizado en octubre en Lima, pude conversar en exclusiva con Peter Cerda regarding the challenges that Ecuador has to have more competition and cheaper air tickets.

Peter Cerdá IATA HIGH
Peter Cerda, THERE IT IS

Cerda is emphatic when pointing out that "Any tariff restriction imposed by the government will have a negative impact on the country's connectivity". Market freedom is essential, because airlines must compete based on what «el consumidor considera justo, not what the government considers". History proves it: in countries where governments try to put controls, "in the end, the passenger will pay more, and the country will suffer with less connectivity, less competition and less of its citizens traveling". Instead of implementing reforms that attract more competition, se cae en la tentación de «querer regular el mercado», un enfoque que perjudica al país, limitando las posibilidades de viaje de los ecuatorianos y la llegada de extranjeros.

El riesgo de pérdida de vuelos

The Ecuadorian market, aunque con gran potencial, es visto como un mercado «poco volátil» by the airlines. Esto significa que cuando las condiciones operativas se complican debido a situaciones políticas o sociales, las aerolíneas tienen la capacidad de reaccionar con celeridad. Cerda subraya que «la línea aérea son muy rápidas a reaccionar y a tomar decisiones en reducir la capacidad o en los vuelos». Una tarifa tope reduce la rentabilidad y el incentivo para operar, especialmente en rutas con baja demanda o altos costos operativos. Si se restringe el techo de ingresos, se afecta directamente el modelo de oferta y demanda del que dependen estas empresas. As a result, «menos ecuatorianos de una buena forma van a poder viajar y más extranjeros van a dejar de ir al país» por la reducción de opciones y la posible subida de precios en los pocos asientos restantes.

No to air fare regulation in Ecuador

Si el objetivo es que el mercado tenga tarifas más accesibles, la solución no es la regulación, sino la eliminación de barreras y la revisión de la estructura de costos. Cerda indica que se debe «replantear la raíz del asunto, ver y evaluar dónde es el problema, si es doméstico, why, si es una razón de falta de conectividad o de competencia». Es fundamental sentarse con los distintos ministerios y evaluar cuál es la problemática real.

One of the biggest obstacles to price reduction is the tax burden. IATA/ALTA executive reveals eye-opening statistic: The average tax on air tickets globally is 27%, while in the region the average is around 40%. This means that "The government has to do its part". As a positive example, Cerda remembers that the reason why he saw a "Increase in connectivity in Ecuador was the moment they reduced taxes". For the future, the key is to ensure political and regulatory stability, because the country has a “great potential to continue growing”. The goal, in Cerda's words, es «follow the policies, the agendas that are being developed that will help tourism development [and] air Transport. We have to ensure that they continue to be fulfilled.".

The elimination of the fuel subsidy

Peter Cerda mentioned the complexity of eliminating the fuel subsidy at specific airports, like that of Cuenca and Manta. He explained that this subsidy was essential for "keep the operation viable" in those destinations, since there is often not enough demand to fill a plane every day, and subsidies helped "maintain the profitability of those flights". The concern is whether these operations will remain viable without state aid., due to the high costs involved for airlines in operating in markets with limited demand.

In this situation, the industry, via IATA and ALTA, has made a request to the government, offering studies and support to the Ministry of Transportation. The objective is to work in a joint plan to ensure these important flights can continue to operate. The key is evitar que la suspensión del subsidio genere un efecto negativo in the connectivity of those cities, highlighting the importance of public-private collaboration to find mechanisms that offset this potential increase in costs and guarantee the continuity of air service.

✈️ Exclusive Benefits for Readers

Search here for hotels ALL over the world at the best price.

Leave a comment on this post!

2 comments on “Why regulating airfares is a setback?”

  1. For this, an efficient and law-compliant DAC is needed to promote commercial civil aviation and not put as many obstacles as possible to scare away investments and overlap flag sales to LATAM AND AVIANCA as they do by allowing airlines to operate with leased aircraft without requiring Ecuadorian registration plates because no one finances or leases planes with the Ecuadorian flag and privileged wings if they allow them to operate with CC and HK registration plates AMONG OTHERS which gives them a great advantage