The Costa Rican Airlines Association (ALA), the Latin American and Caribbean Air Transport Association (ALTA), and the International Air Transport Association (IATA) warn that the bill aimed at promoting low-cost flights between Costa Rica and Central America and the Dominican Republic —which has already been approved by the Legislative Assembly in its first debate— will achieve the opposite effect to what the legislature intends.
Although the industry fully supports the idea of improving the country’s air connectivity, stipulating a maximum value for the fare applicable to a reduced government tax will limit the range of services offered to passengers. The project has been promoted under the argument of fostering intraregional air traffic. However, with such a restriction, the airlines will not be able to offer all their fares and products, which will discourage their interest in developing the Central American market. Moreover, the proposal contravenes existing laws and international agreements of which Costa Rica is a part.
The global airline industry has been moving towards deregulated markets
Since the second half of the 20th century, the global airline industry has moved towards deregulated markets. There is ample evidence suggesting that countries that have dismantled price-fixing schemes achieve a positive effect for consumers and air connectivity. For example, Colombia decided in 2012 to eliminate tariff caps and, as a result of this decision, tariffs have been significantly reduced and the market has grown at an average annual rate of 6.7%. For this reason, imposing a limit on airfares—regardless of the amount—could be considered price control, which would limit free competition, reduce the opening of new routes, and affect Costa Rica’s connectivity. In summary, the opposite effect of what this initiative intends is produced.
For aviation to truly act as an economic catalyst, the Costa Rican government should, instead of establishing conditions that limit fare offerings, promote competition in the air market by allowing airlines to freely offer services associated with the needs and interests of the user and market considerations. This will be achieved, for example, by reducing fees and taxes on airline tickets for all types of flights, without conditions on maximum fare amounts or specific routes.
We urge the members of the Legislative Assembly to establish a dialogue with the industry to reform the proposed law with equitable solutions that enhance the benefits that air transport brings to the country and its citizens.
More information:
ALA
Email:[email protected]
ALTA
Email: [email protected]
IATA
Email: [email protected]
