Ticket Fares in Colombia Will Be More Expensive in 2023

Ticket fares in Colombia will rise with up to 40% starting with January 1st, 2023.

The average cost of a ticket to travel to Colombia starting January 1, 2023, could rise up to 40% as a result of a combination of many factors including the expiration or reduction of the Value Added Tax (VAT), on tickets, from 19% to 5%.

What will happen to ticket prices in Colombia next year, and why?

Colombians who fly next year will pay higher fares, and overall experience, than they did in the past three years. The Colombian government has reduced VAT from 19% on domestic and international fares to 5% in order to help the airline industry recover after the COVID-19 pandemic. This measure will expire on December 31, 2022.

Several Colombian airlines have created promotions to encourage passengers to spend now before prices rise.

This VAT reduction has made Colombia's aviation industry the most successful in recovery. The Latin American & Caribbean Air Transport Association released data that showed that South America had a 20% increase in international travelers compared to 2019, and was ranked second only to the Dominican Republic (27%). The country saw an 18% increase in domestic traffic, which is the highest growth rate in the Latin American region.

However, Colombia's recovery may be hampered if the VAT is not raised. Inflationary measures are expected to cause prices to go up even more in the airline industry. Guillermo Reyes (Colombia's Minister for Transportation) stated that prices will rise due to inflationary measures:

“As of January 1, a tax benefit that existed is eliminated, and this will cause ticket prices to increase, in addition to what already has to do with the effects of the consumer price index. This is so that Colombians are not taken by surprise when they buy their tickets in January. What we understand is that, with taxes and annual increases, prices could go up between 30 and 40%.”

What effect could we expect?

The most affected segment could be tourism. The entire tourism industry in Colombia will see an increase in prices next year, as ticket prices will rise. Bloomberg reports that a VAT reduction for hotels, touristic services, and bars will end on January 1, 2023.

Paula Cortes is the president of the Colombian Association of Travel Agencies and Tourism. She stated that the industry is concerned about the potential impact of price increases on the country's tourism growth. Colombia's Minister for Transportation stated that the government will try to limit the impact of rising prices in 2023.

The airline industry in Colombia has seen a tremendous traffic recovery, but it has not always translated into great economic performance. Avianca is reportedly looking to merge with ultra-low-cost carrier Viva. After nearly three years of pandemic-related impact, LATAM Airlines Group is still not profitable.

 

Source: simpleflying.com