Blow on Avianca by raising value-added tax from 5% to 19%

With the new tax reform, airline tickets will see an increase in value-added tax, which will rise from the 5% granted as a benefit under the pandemic, to 19% from 2023. This will affect airlines such as Avianca although by adopting low-cost characteristics, it will Prices continue to rise.

The new tax increase will, for the passenger, account for more than half the cost of the ticket. Avianca realizes that it does not have the most competitive fares, adding the macroeconomic factors that have affected the airline sector.

“We are not accompanied by more competitive prices because the world has changed us (…) The price of oil is actually 15% higher than last year, and the price of the plane (fuel) is more than 45%,” said Adrian Neuhauser, CEO of Avianca, as reported by Infobae. Latin American inflation is in the double digits, and the dollar is being revalued in double digits and currencies are, therefore, depreciating by double digits.”

Similarly, Avianca’s VP of Communications noted that the airline has a “consistent desire and intent to be more cost competitive,” and added that “in order to bring costs down, you have to have a much lighter structure, which means it has We’ve been reconfiguring our aircraft, giving the traveler the possibility to choose how they want to fly, changing, for example, the sale on board. All of these are decisions to have a much lighter cost structure and that in the long run translates to a better price.”

As mentioned REPORTUR.coNeuhauser has asserted on several occasions that Viva would go bankrupt if it did not join Grupo Abra, in a goal that was postponed because Aerocivil de Colombia deemed it infringing on free competition. (FIFA would go bankrupt without joining Apra, according to Avianca’s announcements.)

It’s a complicated situation because we think FIFA needs financial support. “We think the right thing for the country, for employment, is to let Fifa be bailed out,” Neuhauser said at the time.