DALLAS – The Americas represent a dynamic and diverse region for commercial aviation in the eyes of the International Air Transport Association (IATA), presenting both challenges and significant opportunities for growth.
Airways, in an exclusive interview, spoke with Peter Cerdá, IATA’s Regional Vice President for the Americas, to better understand the impact of the Ukraine crisis, the current regulatory environment, infrastructure development, and the ongoing COVID-19 pandemic on commercial aviation in the region.
Brent Foster (BF) The Ukraine crisis has broad global ripple effects. How is IATA helping airports adapt and find new business with new limitations on flights between Russia and the Americas?
Peter Cerdá (PC) When you look at it from an operational component, the closure of the airspace around Ukraine and restrictions over Russia have an impact on travel. It’s going to have an impact on having to take alternative routes, flying non-traditional routes that in the past you just didn’t do.
For example, flights from France to Japan are now going to have to come over the old way of flying, which was over Alaska, and hopefully, winds will be favorable and you can continue. Not land and do a tech stop in Alaska.
We’re having to look at other options to accommodate the restrictions that are in place. We have to look at the operational component because that’s going to add more flying, more time, and more fuel consumption. We’re looking at how we can accommodate and help our members in a strategic and tactical way. Airlines will then make decisions on whether they will continue to fly, but those are commercial decisions.
From IATA’s standpoint, what we want to make sure is that, from an operational perspective, we are there to support the members, make sure that the right flightpaths are in place, ATC is coordinated in an adequate manner, and then we have airports that are ready and able in case you have any route diversions for any reason. That is more operationally driven.
In terms of politics, we don’t have much of a position. Airlines have to make decisions to postpone or cancel flights for now based on the sanctions in their countries.
In terms of the rest of the region, there is an impact. Russia is an important market for destinations like the Dominican Republic and Cuba, and that’s going to have an impact because those Russian carriers are also going to be facing restrictions in terms of the airspace that they use. They are going to have to fly a lot further to get to their destination, and that may not be viable.
When you are looking at such long flights, the winds and weather have their place. One day the conditions may be suitable and the next day they may be very different, and it adds much more difficulty to the flights. As an industry, that’s what we’re all facing, having to adapt, having to look at the tactical challenges on a day-to-day basis and address them.
BF With the Ukraine crisis, will IATA take steps to reduce the effects of higher jet fuel prices on the growth of air travel in the Americas?
PC Unfortunately, it’s impacting society in general, from airlines to the gas you pump in your cars to the gas that helps heat your homes, and the challenge has become a global issue. From a fuel conservation perspective, what we are going to do is try to look for optimization. We are working with the FAA, Nav Canada, and Iceland to try to maximize the efficiency of the airspace to help the industry as much as we can.
It’s looking at the low-hanging fruit where we can cut routes, cut times in flights, and make sure that we’re reducing ground delays and en route holdings as much as possible.
BF Prior to the Ukraine crisis, Brazil, Colombia, Costa Rica, Cuba, and Mexico had jet fuel prices out of step with international market reference prices. Has IATA taken steps to bring those jet fuel prices into the international market reference?
PC I’ll focus on Brazil, which is the most important one. Brazil is an oil-producing country. The fuel that is used is local in most cases. However, they tax it as if it were an imported commodity on the domestic side. That’s a huge implication for the domestic service where your fuel is local and you’re being charged as if it were imported.
It becomes a huge operating cost for the airline.
That is something we’ve been working on with the Brazilian authorities for some time. We’re working on the regulatory side, on the governmental side, at the congress to bring Brazil into what the global best practices are, but that’s an example of where we’ve seen a distortion in the market.
We’ve seen policies that have been put in place that are hampering industry growth instead of really helping the industry promote more air travel because of the taxation on fuel.
BF Do the high fuel prices in Brazil affect both international and domestic flights?
PC It’s related more to the domestic side because it is a larger sector. Let’s make it competitive. It’s local fuel for local flights and let’s have it not get taxed as if it’s an imported commodity.
BF Has taxation out of step with ICAO principles and policies been a burden to airline recovery amid the COVID-19 pandemic in the Americas?
PC We have to remember that in Latin America, there was no government financial support to the industry during COVID-19, unlike in the United States and in Europe, where governments stepped up to help the airlines through the difficult challenge. As a result, we’ve had several airlines in Latin America that have gone bust, closed, and not returned. We have had other major players that had to file for Chapter 11 to reorganize.
What we have been asking governments to do this time is to stimulate the market. Most of our countries in Latin America are heavily dependent on travel and tourism, and by implementing new taxation, new taxes, and new fees, you are going to deter consumers from coming to your market.
Unfortunately, we have had countries like Suriname that have increased the sales tax from 8% to 12%. We have St. Maarten, which is looking at implementing COVID-19 insurance of US$30 for travelers to become a permanent charge. We are talking about COVID-19, which is a non-factor. This insurance was put in place when the vaccines were not available. You have vaccines, you get tested before you go in, so why are you still charging US$30 for a so-called “COVID-19 insurance” that no one is going to use?
What the government is doing is taking advantage of consumers and passengers coming in and charging an added tax.
We’ve seen this in Argentina, for example. They are adding an additional tax on all international tickets that are being sold locally in pesos, which is going to increase the price of international air travel. You’re discouraging Argentinians from being able to travel, and again, this hurts everyone. It means Argentinians won’t be able to travel, and the international departure tax is going to deter travelers from coming in.
What we have really been encouraging governments to do is to not increase these charges but to decrease them. This is a time to work with the industry because there is a greater opportunity to get more traffic, and more travel, particularly in the Americas region, where every country is open basically. While we have certain areas here and there where you may have some sort of testing, some sort of quarantine, the rest of the region is open.
If you go to China, there are 13 provinces that remain closed. If you go to Asia, markets are just beginning to reopen.
In our situation, we’re totally open for business. What we should be doing is taking advantage of the fact that the region is open and that connectivity has strongly come back. We should be pushing for more frequencies and for more flights to come in, but this is not the right way to do it.
BF Airlines, including Aeromexico, Viva Aerobus, and Volaris, are planning to operate a small number of flights out of the new Santa Lucia Airport in Mexico City. How will IATA help spur the growth of the Santa Lucia Airport and provide more travel options for Mexico City residents?
PC I’m going to backtrack a little bit just to add onto Mexico. Mexico, for us, has been the example to follow during the whole crisis. From the outset, they said, “we will not help; we will not provide financial support to any of the airlines. However, we will not close the borders and we will not implement requirements that go above and beyond what the global best practices are.”
As a result of that, during a period of time when we had countries closed with no flights, Mexico was open for business.
Last year, they had over 100% growth compared to 2019, pre-COVID, domestic and international was booming almost at 98% so because the country did not implement added restrictions, because they did not close, because they did not add taxation, and because the sector was very aligned with the government with tourism it was a very safe environment for passengers to go.
People went to Cancun, they went to Mexico City, and they went to Puerto Vallarta. There were good policies in place, good health measures in place, and there were no significant outbreaks of COVID among foreign travelers. Mexico obviously had its own issues with COVID, but it wasn’t for the traveling public. It was done in a very safe and responsible manner.
That’s an example of where you remained open, you incentivized to come, you didn’t increase, and people came. That’s an example where people want to travel as long as the conditions are permissible to travel.
With regard to Santa Lucia, Mexico has had a significant challenge over the years with its infrastructure. The current international airport has been oversaturated for years. It’s actually on a dry lake and the airport is slowly sinking. The runways are on hydraulics.
There is a huge need for a new airport in what is the second-most important country in Latin America, with the second-most important international airport that has overcapacity but has no opportunity for growth.
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Featured image: Peter Cerdá, IATA Regional VP for the Americas. Photo: IATA