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Latam, Caribbean Need State Agendas to Promote Essential Service

By Jose Ricardo Botelho - ALTA
Executive Director

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By Jose Ricardo Botelho | Executive Director - Tue, 01/10/2023 - 17:00

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In September 2022, Latin America and the Caribbean reached the same number of passengers carried in 2019 for the first time and even exceeded that mark by 1.2 percent, becoming the first region in the world to achieve this post-pandemic recovery milestone. North America reached 96 percent and Europe 86 percent, compared with September 2019. The recovery in Africa, the Middle East, and Southeast Asia was also below 2019 levels, with Southeast Asia seeing the slowest recovery at 75 percent.

In terms of RPK (revenue passenger per kilometer), the region continued to lead the recovery worldwide, despite not reaching 2019 levels, although it was very close to hitting it, with 97.4 percent. Not surprisingly, passengers have recovered faster than RPKs. This is because many travelers prefer domestic or short-haul flights to long-haul or transatlantic flights. North America and the Middle East follow with 92 percent. Southeast Asia was at 65 percent of its 2019 levels. 

Also, it is observed that almost all countries in the world are reducing passenger traffic to the US, except for the LAC region. The countries that grew in terms of passengers were Mexico at 29 percent, Dominican Republic at 33 percent, Jamaica at 14 percent, Colombia at 17 percent, the Bahamas at 6 percent, and Costa Rica at 6 percent. The only countries in the region that fell were Brazil (-32 percent) and Panama (-8 percent). As for China, the second-largest economy in the world (the US is the first)had a -98 percent drop, and Japan, the third-largest economy, had a -60 percent drop. These figures are mainly due to the restrictions imposed by COVID.

Over 300,000 additional passengers versus September 2019 were carried in Latin America and the Caribbean, setting a particularly decisive milestone, as it is the only region where air transport did not receive economic relief during the pandemic. 

In 2020 and part of 2021, some countries did take measures, such as temporary tax reductions and postponement of payment dates for some fees, but there were no loans or public investments to support an essential service such as aviation. Millions of people were repatriated by air and vital supplies, including vaccines, were transported to meet the urgent needs resulting from the health emergency. The supply distribution chain remained active and all the essential cargo was carried for the population when other industries stopped working.

Aviation was there for the population. The operators managed with great effort to keep the service going and, now that people are traveling again, either for tourism or business, it is evident that air transport is a necessity in the region and not a luxury.

Therefore, ALTA constantly speaks of state agendas. That is, collaborative work strategies in the nations of the region that include the travel and tourism industry as an important economic sector, a fundamental contributor in creating jobs, income, and development for the population. It is a service that contributes to the social and economic dynamics of the countries and that, therefore, should have a collaborative work plan between the public and private sectors to generate efficiencies, optimize regulations, and continue allowing access to more and more people to the safest and most efficient means of transport.

Making air transport part of a state agenda means it transcends governments and becomes a priority for public servers. Aviation activates an extensive value chain that, in addition to creating millions of direct jobs, also creates millions of indirect and induced jobs, from the driver who picks up the passenger at the airport to those related to hotels, meals, and attractions, among many others.

At the technical level, opportunities have been identified and discussed to improve the region's competitiveness for air transport. This means conditions that the countries offer for the attraction and development of air operations to make air transport more affordable for more people and for connectivity to continue to grow and bring aviation's economic and social benefits to all corners of the region.

Among the challenges the industry faces toward a bright future are inflation and fuel prices. In the first case, our region is undergoing an inflationary phenomenon, like other regions worldwide. According to IMF estimates, inflation in the region will continue to rise by the end of 2022, reaching 14.1 percent. In this context, in a region where 24 percent of the basket of essential goods is destined for food, the consequence is that the remaining income for consumption will be reduced. On the other hand, airlines also consume local goods and services, which are being hit by price rises. At the same time, fuel continues to see historically high prices. On Oct. 24, 2022, the cost of jet fuel reached 186 percent above January 2021, while the price of Brent crude oil increased by 82 percent compared to the same period. The rising fuel price has increased the weight of this input in the cost structure of airlines, representing 37 percent of operating costs in the second quarter of 2022. 

Some other challenges are high taxes and fees, outdated regulations that do not comply with international standards, lack of infrastructure and investment, and lack of training. But the future is promising, and I am confident that together we will be able to make progress in necessary ways for aviation to continue to be the great connector of Latin America and the Caribbean.

Photo by:   Jose Ricardo Botelho

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