Ecuador's Government has revealed a plan to create incentives to modernise the country's airline fleets by opening a special credit line for new aircraft acquisitions, and eliminating fuel-tax subsidies for older types.
A source at the presidential office in Quito explains that Ecuador's current fuel subsidy for domestic flights costs the country more than $130 million per year.
"After assessing this situation, which needs to change because of budget constraints, we concluded that the subsidies are misused - in the sense that we are allowing our airlines to continue operating with outdated, fuel-inefficient aircraft which have, however, a very low financial cost," says the source.
Ecuador's principal private airlines, Aerogal and Icaro, operate exclusively older-generation jets such as Fokker F28s, Boeing 737-200s and 727s. These will no longer be entitled to fuel subsidies in 2009.
Only military-owned carrier TAME has renewed its fleet, using Airbus and Embraer jets, and will continue to receive the subsidy.
The Government source says: "This is a simple equation. Fuel savings produced by operating last-generation aircraft could nearly halve our subsidy budget.
"The freed money will be used to offer the airlines a credit line to support their fleet-renewal process."
He says that the availability of loans is "not only a matter of low interest rates", because Ecuadorian companies have difficulty accessing international loans, particularly during the current financial crisis.
Ecuador is preparing an initial credit line of $100 million for airlines which will be backed by the Inter-American Development Bank and the Andean Development Corporation.
But a source at Icaro says that this figure "is not enough", adding that the current proposal, which has yet to be made official by the Government, is "immature".
He criticises the change in fuel subsidies which, he says, will immediately benefit only state-owned TAME, and suggests the Government wants to "return to a monopoly in air transport". Aerogal could not immediately comment.
Source: Air Transport Intelligence news
