Monday, June 17, 2024

Could a reduction in airport fees make flights cheaper in Mexico?

Mexico is considering reducing airport use fees (TUA) as part of an airport tax shakeup intended to reduce flight prices for consumers.

The Chamber of Deputies voted last week to raise duties on airport operators’ gross revenues from their concessions by between 5-9%. If confirmed by the Senate, the extra income will be put into trusts to strengthen and improve the airport system, managed by the Defense Ministry (Sedena) and the Navy (Semar).

A reduction in the cost of TUAs should allow more people to fly, says Deputy Transport Minister Rogelio Jiménez. (Carlos Aranda/Unsplash)

Responding to concerns that the hike could raise costs for consumers, government officials said the change would be compensated by an 8-12% decrease in airport use fees, which travelers pay to operators as part of the cost of their flight ticket.

Miguel Vallin, head of the Federal Civil Aviation Agency (AFAC) told the ALTA Airline Leaders Forum conference that the government expects the fare restructuring to reduce ticket costs by 9%-12%.

“The increase in duty will be offset by a decrease in the TUAs, so that the costs faced by airport groups do not vary and no cost is passed on to the [ticket] buyers,” Gabriel Yorio, undersecretary of the Finance Ministry (SCHP), told the Senate joint committee.

Mexico’s airport use fees are some of the highest in Latin America, adding up to US $60 to the price of an international flight, and up to US $40 to domestic flights.

TUA fees can add as much as $60 to the cost of an international flight in Mexico. (Another Believer/Wikimedia)

In an interview with Reuters, Deputy Transport Minister Rogelio Jiménez Pons said that the fee reduction should be in place by early next year and is intended to boost air travel in Mexico.

Airport groups reacted with alarm, as shares in some airport operators dropped by as much as 44%. ASUR, which operates nine airports in southeast Mexico, said it was forced to scrap a draft of its development plan after the tax hike was announced. The change could cost airport operators an extra US $118.58 million a year, according to Reuters.

“This represents a reduction in profits for airport groups,” Vallin conceded. “But it’s not as drastic as some want it to seem; rather, it’s a reordering of how rates should be based on growth and users’ ability to pay for the service.”

President Andrés Manuel López Obrador has often criticized airlines and airport operators for profiteering. His government is planning to launch a new military-run commercial airline in December, Mexicana de Aviación, which the president claims will offer lower prices than the market rate.

Despite announcing that it will commence operations later this year, Mexicana is yet to officially submit its aircraft for inspection by Mexico’s civil aviation authority. (Andrea Murcia/Cuartoscuro)

However, tickets for the new airline are not yet available to the public, as AFAC has yet to fully approve its operation.

“We can’t talk about a precise date yet because as of Friday we hadn’t received the request to review the aircrafts’ information,” Vallin said. “Once we receive it, we will give it due process to authorize services, but for now we don’t have it.”

With reports from Reuters, Forbes and Bloomberg en Línea


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