Monday, 1 June 2020

What is the impact of recent turbulence on Costa Rica’s commercial aviation?

Tourism would be affected by complaints on airport fees. Costa Rica has the highest air fuel prices in the region, according to the International Air Transport Association (IATA)

Volaris announced on November 13 that it would freeze the growth of its operations in Costa Rica. The risk of a strong increase in costs, the possibility of extending a contract and the current competitiveness of fares are the three axes of the tense situation between the airlines, the manager of the Juan Santamaría international airport (SJO) and the Government.

The airline counters on the departure level of the Juan Santamaria, commonly known as the San Jose airport, which has the capacity to receive 5 million passengers per year. Photo Esteban Monge/La República

There are three different themes that each actor is defending in the same discussion, so they generate noise even if everyone tells the truth, in their own way.

The tone of disagreement was given by the International Air Transport Association (IATA) through a press release sent from Miami, on November 18.

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The IATA used terms such as “threat” and “deep concern” to refer to the possible impact of an increase in operating costs in 2020, at the Juan Santamaría International Airport (SJO), under the management of Aeris Holdings Costa Rica.

IATA even described the increases as excessive.

This is the first threat of crisis for the manager, for its part the Government faces the third blow in the aviation sector, following criticism for an apparent indecision about the project of an airport in Orotina, also included in the IATA complaint, and the drop in the airport security rating applied on May 13 to the country by the U.S. Federal Aviation Administration (FAA).

A day later, on November 19, Costa Rica’s Civil Aviation Technical Council (CETAC), delivered a press release issued from the Casa Presidencial (Government House). Rodolfo Solano, head of CETAC, acknowledged that he understands the concerns of IATA, but clarified that there is still no request from Aeris for the rate increase.

However, Solano’s message was characterized by insisting that the CETAC is in a process of study (on tariffs, new airport and investments) and not in a decision-making phase. Nor did it provide a deadline in which this stage would be completed.

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The Instituto Costarricense de Turismo (ICT) – Costa Rican Tourism Board – maintains the efforts to attract airlines from the main markets, North American and Europe.

María Amalia Revelo, Minister of Tourism, adhered to the Government’s argument on the issue of tariffs and told El Financiero (EF) that the costs to operate in the San Jose airport are competitive, therefore, current operations flow normally.

On the issue of airport security, the Minister clarified that the ratings drop only precludes the increase of non-stop flights of national flag airlines to the United States (Avianca de Costa Rica and Volaris Costa Rica), not the attraction of airlines. Both airlines have announced hold on growth on their operations in the country, in contrast to foreign airlines.

“At this time we see significant growth in the operations of the American and Canadian flag airlines (Air Canada and Westjet, for example) to Costa Rica,” said the minister.

In Liberia, the manager of Daniel Oduber International Airport (LIR), Coriport, said they perceive the discussion between IATA, Aeris and the Government not involving them.

César Jaramillo, general manager Coriport, told EF that the Guanacaste Airport is capable of serving up to 1.7 million passengers a year “with the highest standards of quality and safety”. In 2018, the terminal registered a total passenger traffic of 1,125,170 and in March 2019 it reached its highest monthly mark, with 166,140 people, a record figure since its beginning operations in 2012.

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“Sample of this capacity and service is the recent award we received from the International Airport Council (ACI), which recognized the Liberia airport as the best in Latin America and the Caribbean for its customer service in the category of less than two million passengers a year,” Jaramillo emphasized.

In its report, the EF said Aeris declined to give an official position on the claims of airlines. However, Rafael Mencía, executive director of the company, gave statements to La República, where he said that the rate increase is not yet firm, without denying IATA’s complaints.

“It is normal for tariff increases to occur in a context where major works had to be carried out to modernize the airport, as part of the master plan,” Mencía told La República earlier this week.

This is the first time in years that Aeris Holdings Costa Rica faces a frontal attack to its management, as the only recent complaint from IATA had been more nuanced: in 2018 the IATA presented its arguments against costs and taxes, throughout the Central American region.

As long as the rate increase remains undefined, it is the Government that faces a major challenge, since it must resolve its position on the construction or not of an airport in Orotina, and be aware of the progress to recover the airport security rating.

The International Air Transport Association (IATA) currently includes about 290 airlines in 120 countries. This corresponds to 82% of global air traffic.

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