New airport tax could threaten Spanish connections

Could rising airport taxes in Spain signal trouble for low-cost airlines?

Spanish Transport Minister, Oscar Puente, recently endorsed a proposal by Aena to increase airport taxes by 4.09 per cent starting on March 1.

This decision, revealed during an event organised by Forum Europe, has sparked considerable concern among airlines.

Impact on airline investments

The rise, initially proposed to the National Securities Market Commission (CNMC) last July, aims to address post-Covid challenges and inflation.

However, the airline industry, including leading players like Ryanair, unanimously opposed this, fearing it might hinder the sector’s recovery.

Puente’s affirmation of the government’s support for the increase has intensified these fears. As part of a balancing act, he mentioned an unspecified incentive plan for airlines, focusing on boosting international traffic at regional airports.

Industry’s reaction and concerns

The airline association ALA, representing 85 per cent of Spain’s air traffic, expressed disappointment. They had advocated for a tariff freeze or a modest 1.5 per cent increase as a more viable alternative.

ALA argues that the approved rise undermines sector competitiveness and comes at a time when many airlines are still grappling with debt and low profitability.

This sentiment is shared by low-cost airlines like Ryanair, who had laid out an investment plan worth €5 billion over seven years in Spain, now potentially at risk.

Ryanair’s stance and future outlook

Ryanair, yet to comment on this latest development, had previously appealed against Aena’s attempt to override a 2021 DGAC decision to freeze fees until 2027.

Eddie Wilson, the CEO, labelled the move as a threat to Spain’s crucial air connectivity and contrary to government policies promoting growth. The impact of this tax increase is particularly concerning for low-cost airlines, where profit margins are already slim.

Aena’s perspective on rate changes

In response, Aena emphasised that even with this hike, the 2024 rates would still be lower than those in 2019, amounting to an additional ’40 cents per passenger.’

This increase reflects a 3.5 per cent recognition of inflation, leading to a maximum annual income per passenger rising from €9.95 to €10.35 from March.

The final decision, however, rests with the CNMC, which had previously endorsed the ‘P Index’ application in a June report.