Interview: Aviation in the Americas with Peter Cerdá

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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Texcoco, which was going to be the airport that was going to replace the international airport, was canceled by this government. The government decided to invest in Santa Lucia. We've seen Santa Lucia, and we are working very closely with the authorities. We have a technical team that has been providing technical support to the authorities. It is a world-class airport. It has the right infrastructure. It has the potential to grow.

What we will have to do as an industry working with governments is determine if that airport will become an international airport in the future. If that is going to be the case, and if there is an opportunity to grow, we need to start planning now. The airport is now well set up. It has two runways and a good terminal for regional travel.

If we want to reach the 60-million-passengers-per-year target for the future and be able to have an airport for the next 20 to 30 years, we need to start planning. We need to start almost replicating what we have today and doing the same thing. We have to duplicate the infrastructure that we have today. We are very confident that that may be a way to move forward.

The biggest challenge for us in Santa Lucia is not the actual airport infrastructure, which is going to be good. There is an air force base at the airport. There is room to grow. The infrastructure is state-of-the-art, it has been done in a professional manner, and the industry has been involved. What is going to be critical are the arteries, the highway systems, and access to the airport.

This is an airport that is 40 km outside the city center, which in today's environment is not unusual. If you go to Denver, you go to Munich, you go to Incheon. Most of these airports are outside, which requires a long distance of travel. The difference between those airports and this airport is that in those airports you have high levels of infrastructure already in place. You have a good highway system, and you have a good train system that links the airport. You have highway systems that link different parts of the city, and we're talking about a very big city.

That is what is not there today. They are in the process of constructing it, but we are going to need more than one highway to the airport. We are going to need various highways that link to various parts of the city. We are going to need a rail system that is going to bring passengers to the airport.

We are going to have to ensure that passengers can travel in a safe and secure manner between the city center and the airport. If we can do that, the 40 km distance is not even an issue, but we need to have the entry points, and we need to have the arteries for passengers to get there. They should not have to drive for two and a half hours to get to the airport for a one-hour trip.

It becomes really a municipal or local issue, rather than an aviation infrastructure issue.

The aviation infrastructure is perfect for what we need today. For where we want to go in the future, it is clear that we have to double the size, but the infrastructure, the capability, and the landmass are all there for that to happen.

We need the government to have a position with the industry, and this would be my call out to the government. The decision that is made on the future of the airport system in Mexico has to be done in coordination with the industry so we are able to coordinate over the next several years in terms of what the path would be for the current international airport and what the future of Santa Lucia airport will be.

BF Many IATA member airlines have shifted to the new Palmerola International Airport outside of Tegucigalpa, Honduras. How has IATA eased the transition? What opportunities does the Palmerola bring?

PC Tegucigalpa, the capital of Honduras, had one of the most challenging airports not only in the region but in the world. You had four airlines operating out of the airport. When you look at Costa Rica, when you look at Belize, you had double the number of airlines flying into their capital cities.

The opportunities with the new airport are night and day.

The terrain, the obstacles, and the infrastructure are going to give the airport the capability to become a much more competitive airport. With more connectivity, you won't be limited to four or five destinations. You'll be able to go to up to 12 or 13 destinations. You'll be able to do long-haul flights from Europe, which today do not occur.

The only long-haul flight [in Honduras] is in San Pedro Sula and that is the Air Europa to Madrid.

Whereas now you'll be able to decide if you want to go from the center of Tegucigalpa to this airport. You'll be able to do night operations, in which there is a lot of night flying from Central America into South America and into North America.

You are going to have fewer restrictions operationally, you are going to have fewer restrictions in terms of connectivity and scheduling, and you are also going to give a much better passenger experience.

The airport has been able to be constructed and developed with today's technology to meet today's needs, whereas the old airport was an airport that was built back in the 50s when things had not changed too much and there was no capability or opportunity to improve it because of the constraints that airport was under.

BF How is passenger accessibility for Palmerola International Airport?

PC The airport is 45 minutes outside the city. There is a good road that links the city. Actually, it links from Tegucigalpa, but because of the geographic location of the airport, it's also going to give an opportunity to cover a much larger range of the country that is not served because it is between San Pedro and Tegucigalpa.

You're going to be able to get a much bigger community. You are also going to be able to stimulate more business in that area of the country.

I use Quito as an example. When Quito moved its airport from the city center to outside. When they moved, which was again 45 minutes, there was a huge outcry because you were in an area that has nothing. Today, you have a city that has grown. You have an airport, you have infrastructure so you have jobs.

The airport has created an ecosystem of social and economic well-being for that community.

That's what we expect to happen as well in Tegucigalpa at the new Palmerola International Airport. You'll have development. You'll have more jobs, more hotels, and more communities. That will help with social and economic well-being. The airport has room to grow. There is enough land that if the airport does well, it can continue to grow over time without any sort of limitation.

BF Will Palmerola International Airport have more cargo capacity?

PC Yes absolutely, in both cases if you look at Mexico and you look at Tegucigalpa.

In the case of Tegucigalpa and Palmerola, the amount of cargo movement out of Tegucigalpa was very little because you were weight-restricted, you couldn't perform it. The cargo had to be transported from the Tegucigalpa area to San Pedro in order to get on an airplane and move.

You won't have an issue here because now you'll be able to create a good, well-balanced cargo facility, cargo infrastructure, and actually, where the airport is located, there is a huge amount of mechanical and natural products, fruits, and vegetables, that will be much more accessible to be transported much quicker, much more efficient, and cheaper.

BF How is the IATA advocating for more effective regulation against unruly passengers? 

PC We certainly support what the FAA did in terms of passengers being fined and prosecuted. We have to understand that the number one priority for airlines, pilots, and crew, is safety.

Things can very quickly escalate when you have unruly passengers, particularly inflight, who can cause danger and harm to other passengers and the safety of the flight.

We are very supportive in terms of what the FAA did. It was a major issue here. We've seen now that the numbers have actually gone down, but at the same time, we have been very close and have been looking at this throughout the region to make sure that regulators and authorities really take this threat seriously and when it does occur, take it head-on, be responsible, and take the necessary actions so it does not become a problem.

BF How will the IATA work to mitigate potential disruptions to air travel caused by the expansion of 5G service?

PC We have been working with the manufacturers. We have been pushing the FAA to implement mandates. It is a significant safety concern that we have as an industry. What we understand is that we need to reach common ground. We understand that the mobility industry needs to expand, 5G is part of today and not the future.

We have seen it successfully implemented in other parts of the world. It's a shame that, in the case of the U.S., the agencies were unable to reach a common agreement with a clear plan and that they waited until the very end.

This is something that as an industry we have been voicing since 2018.

Since then, we knew this was going to happen, we knew the date, and unfortunately, our government agencies were very slow to react; they waited until the last minute, and it really became an inconvenience, a significant safety concern, for our industry, and an inconvenience for the telecommunication industry, which was ready to provide added services for customers.

We are hoping that by the time we get to June, both agencies will have reached an agreement. Based on the data, what needs to be done is to implement a plan to make sure those airplanes flying into those airports can do so in a safe and reliable manner without compromising the ILS or the GPS and so on.

BF Chile recently elected a new government, how will the IATA partner with the Chilean government to ensure growth in air connectivity and travel?

PC Our industry is very dependent on the administrations that are in place after elections because when we talk about policy, when we talk about costs, when we talk about investment, it has to do with the government that is in administration.

In Latin America, we are shifting from open-market, pro-business governments to more social, center-left types of government. That is going to pose a challenge to the industry. We have seen it in Honduras. They shifted to Mexico, Chile, and Peru, where aviation, public commerce, or business-related industries are not the main priority.

That does not bode well for the industry. We are now reorganizing ourselves in terms of our strategy. What is critical and what we are telling governments is that it is critical that aviation has a seat at the table. It is important that aviation, travel and tourism, and air transport be part of a government's agenda.

Regardless of the party, aviation is a force for good that has social and economic implications. In Latin America, they do not have the luxury of the infrastructure that we have in Europe or North America in terms of high-speed highways. Train systems are nonexistent.

Buses are a direct competitor to air travel.

Buses compete not on a flight of 20 minutes with a range of 20 km or 50 km. Buses are competing with airlines on a 1,000-mile route. While the flight will take two hours and 20 minutes, the buses will take 15 hours. The buses are not regulated, the buses are not taxed, and there are no audits on safety whereas the industry is.

This is where we are asking governments to not see the industry as a cash cow, as it has been seen by many governments, as a mode of transportation for the rich. Air transport is a mode of transportation for social well-being. We don't discriminate against who gets on an airplane.

The ULCCs have actually created a more balanced playing field and have given more opportunities for travelers to travel. Today, the ULCCs, the hybrids, and the legacy are now competing, and as a result, we have the cheapest fares in the region than ever before. In many cases, it is cheaper to travel by air than by bus.

What kills the industry is the heavy taxation, the costs that are added to the aviation industry where the bussing system is not. Our call to governments is going to be a different way of working.

We are going to have to demonstrate to governments that the industry here is one that is here to help. We want to improve connectivity. We are here to improve connectivity. We want to better serve customers and give more opportunities for the general population to travel.

In a country like Brazil, it's over 200 million people. Roughly 98 million people travel. When you see how vast the country is, you have over 100 million people that don't get on airplanes. It's the whole size of the continent of Europe and people don't drive from Lisbon to Hamburg; you don't get on a train, you fly.

In our region, we don't have that luxury.

To get from Sao Paolo to Manaus, you don't have a high-rail train, you don't have a highway system because you're gonna have to combat with the rivers and the jungle. Air transport is very, very important.

The social and economic benefits that aviation brings are critical and that's what we need to make sure our governments understand in the region. That's why we want to be more strategic business partners with them because we strongly believe that there is opportunity.

Not only for moving passengers but moving cargo. E-commerce is becoming very important in everyday life. We've seen it here in the U.S. because of COVID, Amazon continues to grow. We do everything on Amazon, from buying a phone to a screwdriver to your food. Imagine in our region, in Latin America, where these goods from eCommerce are going to have to be moved by airplane.

Consumers may not be flying but their services, their products, are going to be coming on an airplane.

Again, that's why governments need to understand that people sitting in first class are not the ultimate value; it's the people in the entire airplane that, for whatever reason, are getting on an airplane to move from one place to another, and below in the belly, where you have cargo. That is, you're moving vaccines, you're moving living organs for transplants, you're moving machinery that's needed for a powerplant to construct or to build a component that is needed for electricity or for heating or whatever to transport flowers or to transport fish.

I always give two examples, particularly with COVID, when countries were restricting airlines from operating. It was not only moving people, because, during that time, not a lot of people were moving, but cargo was very critical.

Take Puerto Montt, a city in Chile that is highly dependent on the fishing industry. The majority of that fish is transported all around the world. Those communities depend on the aviation industry to be able to move all of that fish. When we didn't have the capacity, when airlines were not flying, that fish was not going anywhere.

The same occurred with the flower industry in Ecuador and Colombia. There was not enough uplift, enough capacity, to transport all the flowers that were needed for Valentine's Day and Mother's Day around the world. A lot of that went to waste. That has an impact on the schoolteacher in that community because, indirectly, the school, the church, and the store are affected by the flower industry that's exporting those flowers.

What we say is, in most cases, that these communities will not get on an airplane, but they're dependent on their main source of income, which may be flowers, fish, etc., being exported. When you don't have the capacity, which we didn't at the time, that has an impact.

Again, that's what we want to explain to governments. It's not just about getting on an airplane; it's about what that airplane does for those communities. The more connectivity you have, the more you can sell your country, not only from a travel and tourism perspective but also from moving and merchandising.

When you see a new point of connectivity, that's not only going to bring more passengers, but you're going to be able to import more, and you're also going to be able to export more of your products, and that is what ultimately leads to social and economic gains for the country, for the community, and the provinces.

BF Excellent. Thank you, Mr. Cerdá, for sharing your time and insights with Airways.

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Featured image: Peter Cerdá, IATA Regional VP for the Americas. Photo: IATA