Airlines oppose Philippines Aviation Tax Hike

International airlines operating in the Philippines are strongly opposing a Senate proposal seeking to increase the common carriers tax from 3% to 5%, as well as other aviation tax measures pending in the chamber.

Warning that the "situation was getting out of hand," the Board of Airline Representatives (BAR), the umbrella group of foreign carriers serving the country, said the Philippines risked being dropped as a destination because of the rising cost of travel to the country, aggravated by airline taxes.

"The proposed increase in the common carriers tax will further reduce the Philippines' competitiveness vis-à-vis its Asian neighbors and may result in international airlines suspending operations in the country," the BAR said in a statement signed by chairman Felix J. Cruz.

"Such a scenario would have negative ramifications on other sectors of the tourism industry, such as hotels, resorts, restaurants and other allied industries." 

In fact, a number of international carriers have stopped flying to Manila in recent years, the BAR noted. These include British Airways, Air France, United Airlines, Alitalia, Swiss International, Aeroflot, Garuda Indonesia, Egypt Air and Pakistan International.

Also, Northwest Airlines and Lufthansa have reduced flights and downgraded operations, respectively. All are BAR members.

The organization is currently composed of 30 airlines operating scheduled passenger and cargo flights to the Philippines. Among its members are industry leaders Lufthansa, KLM, Northwest Airlines, Japan Airlines, Cathay Pacific Airways, Singapore Airlines, Emirates and Federal Express.

The BAR noted that airlines had been struggling since the September 11, 2001 terror attacks and subsequent crises such as SARS, the Iraq war and skyrocketing fuel prices making it "doubly hard for industry players to survive."

Last year, the global airline industry suffered an estimated loss of $4.8 billion, on top of massive consecutive losses of $6.6 billion in 2003, $11.3 billion in 2002 and $13 billion in 2001. The proposed tax hike did not help their cause any, the group said. "New aviation taxes are inevitably passed on to passengers in the form of higher ticket prices."

"Although this may appear to raise substantial revenues for the government at the outset, such measures have long-run adverse effects on the economic viability of the airline industry and, ultimately, on the economy in general."

The BAR added, "It is time to reverse the tendency to heavier taxation on airlines and passengers, and to recognize that the benefits all economies obtain from air travel will be seriously reduced if present trends continue."

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