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Philippines: Airline groups protest government plans for increased regulation of aviation sector

The Philippine government’s planned moves to increase regulation of the aviation sector were met with criticism from international airline groups.

In particular, the International Air Transport Association (IATA) waxed hot over a proposal by the Civil Aeronautics Board (CAB) to cap airfares.

“We are against this measure. The prices should be driven by market forces,” said IATA Director General and CEO Alexandre de Juniac.

“Putting caps is the best way to … distort competition to the detriment of the passenger,” he continued.

The CAB proposal is comprised of the issuance of a fare matrix that specifies the ceiling and floor rates of airfares. The ceiling would be determined by elements such as distance, break even loads and return on investments, while the floor should not be lower than 20% of the ceiling rate.

“Fares have dropped 30% ever since pricing was decontrolled since 1996 and we do think that if you cap fares, it will also limit our capability to offer low fares or piso fares,” stated Cebu Pacific President and CEO Lance Gokongwei.

“What we would like to see is a continuation of the liberalized market where we do compete with other carriers and let the customers choose,” the Filipino businessman added.

In a position paper that was given to the CAB, budget carrier AirAsia said that the “imposition of a floor and ceiling rate on domestic fares may unnaturally skew average domestic fares to higher levels while fares for international flights will remain as is.”

“This may paint an unfavorable picture of the domestic aviation industry and affect domestic tourism as passengers will opt to travel internationally where fares are lower,” AirAsia remarked.

The IATA also asked Filipino authorities to halt charging tourism taxes to spark economic development.

“The more tax you put on the passenger, less prosperity you will bring into the country,” the IATA boss said.

The short-term budget boost just as quickly disappears when tourist arrivals plunge and the Philippine government must turn their focus on capitalizing in tourism infrastructure, de Juniac explained.

“The extra tourist dollars you attract will pay the investments and make a greater economic contribution,” said de Juniac.

The Association of Asia Pacific Airlines (AAPA) meanwhile, said more government regulations could hinder the aviation sector from helping out in the region’s growth.

“The ever-growing burden of restrictive government legislation, increasing taxes and charges, and lack of shared vision for the industry, hold back the potential of Asia’s carriers in fully contributing to the social and economic development of the region,” said the AAPA in a statement.

Air travellers as well as airline companies are already bearing the brunt of various taxes and other fees being imposed by governments, the AAPA statement added.

“Despite past exhortations, taxes have been increasingly imposed by various states in respect of certain aspects of international air transport and charges on air passengers, several of which can be categorized as taxes on the sale or use of international air transport in contravention of International Civil Aviation Organization’s policies on taxation,” the AAPA said.

“AAPA renews the call on governments to carefully consider the overall economic effects of putting further financial strain on the traveling public and on the aviation industry, and to refrain from increasing the burden of aviation levies any form.”

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