The International Air Transport Association warned the Philippine government that excessive regulation in the aviation industry could dampen the growth of the sector.
“Well-constructed regulation has played a key role in making the industry safe and reliable. But excessively onerous regulation can be a huge burden on the ability of aviation to deliver its social and economic benefits,” IATA director-general and chief executive Alexandre de Juniac said.
De Juniac cited the new consumer protection legislation in the Philippines that would cap air fares, prohibit overbooking and impose onerous consumer protections extra-territorially.
He said airfares in the Philippines were 77 percent cheaper than a decade before, adding that the number of destinations served directly from the Philippines increased from 40 to 55, while the number of travelers nearly tripled from 24 million to 64 million.
“Aviation is competitive. Airlines offer a wide variety of fares at different price points to satisfy consumer needs. Introducing government imposed fare caps would likely have the unintended consequence of reducing deeply discounted fares. If airlines cannot charge a premium for ultimate flexibility, then covering costs will likely lead to a rise in average fares,” de Juniac said.
De Juniac also said that managed overbooking helps fill the plane and keeps fares low.
“Revenue management systems watch trends and adjust the selling with tremendous accuracy. When they get things wrong, a flexible market solution, not inflexible regulation, is the answer,” de Juniac said.
“Powerful market forces govern a hyper competitive industry. When things go wrong, airlines have every incentive to make them right because they don’t want to lose their customers. And if the customer is disappointed, they have the ultimate power in their wallets of choosing another airline for their next trip,” he said.
He said aviation is vital in the Philippines supporting 1.2 million jobs and $9.2 billion in gross domestic product.
“The domestic network binds the country across 7,000 islands. International links keep families and businesses connected, and bring in tourists. But the social and economic benefits of air transport are at risk if the key issues of airport infrastructure, excessive regulation and taxation are not addressed,” de Juniac said
De Juniac also called on the Philippine government to avoid implementing a tourism tax and to abandon a proposed green fee.
“Short-term budget gains quickly disappear when tourist arrivals drop. The government should focus on making wise investments in the tourism infrastructure that will encourage people to visit. The extra tourist dollars you attract will pay for the investments and make a greater economic contribution,” said de Juniac.
“The proposed green fee is misguided and should be abandoned. Governments through the International Civil Aviation Organization have agreed a global approach to climate change based on improvements in technology, infrastructure and operations. And there is an agreed Carbon Offsetting and Reduction Scheme for International Aviation—Corsia. The cause of sustainability is best served by the Philippines supporting this global approach and volunteering to participate in Corsia,” he said.