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ALTA Calls for Dismissal of Jet Fuel Tax Proposal in Mexican Senate

Written by thomas · Filed Under Commercial 

October 30, 2013

thomas

Miami (October 29, 2013) – The Latin American and Caribbean Air Transport Association (ALTA) today called for the dismissal of the recent fiscal reform proposal that would impose a new tax to jet fuel in the amount of MEX$0.12 per liter of fuel. The plan would heavily affect the cost of jet fuel in Mexico and would have an estimated impact of MEX$480 million annually, further reducing Mexican airlines´ competitiveness. The proposed tax represents an additional financial burden to airlines which already absorb fuel handling fees.
Fuel is the highest and most important operational cost component for an airline, representing an average of 34% of a carrier´s expenses. Any increase or added taxation is expected to have a detrimental effect on the aviation industry in Mexico, as well as a significantly negative impact on its national tourism and business derived from travel. Unlike other types of fuel, jet fuel is not subsidized and it is already approximately 3-7% more expensive to fuel up in Mexico than in the US. The added fuel tax translates into an increase in the prices of air tickets, a possible reduction in routes and consequently would impact the creation of jobs. Because of the high sensitivity to airfares it is estimated that Mexican passenger traffic would be reduced considerably.
The implementation of this tax is not justified from the environmental standpoint either. Mexican airlines have invested and will continue to invest a total of more than US$25 billion in a modern fleet of last generation aircraft, which adheres to all international standards, with up to 20% reduced CO2 emissions. In the meantime, the industry continues to promote and support the development of alternative fuels that will meet the strictest international standards.

The measure is additionally expected to provoke actions of reciprocity by other countries, further debilitating the level of competitiveness of Mexican carriers in the region.

Eduardo Iglesias, Executive Director of ALTA, remarked, “Lawmakers across the region need to be aware of the socioeconomic impact generated by the passing of initiatives such as the proposed fuel tax under consideration. As an industry, we want to facilitate a commercial environment for aviation to continue to thrive so that we can help bring about the socioeconomic benefits projected for Latin America and the Caribbean.”

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