Economy The Government does not dare to cut the bonus for island flights as proposed by AIReF

The Independent Authority for Fiscal Responsibility (AIReF) has proposed to the Government that it cut the bonus for island flights

Economy The Government does not dare to cut the bonus for island flights as proposed by AIReF

The Independent Authority for Fiscal Responsibility (AIReF) has proposed to the Government that it cut the bonus for island flights. That it amend it to make it more equitable and, also, to prevent the companies from keeping part of the aid. Make it more efficient, ultimately. But the Executive refuses to do so. He does not dare for fear of the reaction of the Canary Islands and Balearic Islands and, also, for the political repercussions, according to what AIReF itself points out after the explanations received by the Executive.

The organization directed by Cristina Herrero exposes, specifically, two problems with the subsidy of island flights. On the one hand, that part of the aid is pocketed by the airlines and that, in addition, the measure raises ticket prices. "The evaluation carried out allows us to conclude that the increase in the subsidy to 75% has had a direct effect on the increase in prices on the routes between the archipelagos and the peninsula, which has limited the effectiveness of the aid. Non-residents pay more for traveling to the islands, something especially relevant for two highly specialized tourist communities such as the Canary Islands and the Balearic Islands", AIReF explained specifically in the observatory of findings and proposal that it presented yesterday.

To correct it, the Fiscal Authority proposes "replacing the current subsidy of 75% of the price of the trip with a subsidy of a fixed amount for each of the routes."

And the other problem detected is that the "design of the subsidy generates an unequal distribution of the subsidy between high and low incomes." "A very unequal distribution of the subsidy among residents has been verified. Almost 50% of residents do not fly and, therefore, do not receive any help. High-income residents fly more and with more expensive tickets for what they accumulate throughout the year a significantly higher subsidy than low- and medium-income residents," explains AIReF. The proposed solution: "Study mechanisms to achieve a more equal distribution of the subsidy by income levels."

"All this is directly rejected by the Government because the population identifies it as an acquired benefit and they also point out that its cut would have a high political cost," AIReF explained. This rejection was confirmed last December and focused on the second of the proposals, which points to the unequal distribution of income. But in the organization they understand that this refusal and the explanations received extend to the first problem identified.

AIReF also states that the subsidy has led to a substantial increase in public spending. When he presented his proposal within the Spending Review, the agency estimated that in the period 2016-2019 the figure went from 324 to 730 million. "It is a clearly increasing cost year after year," they add in AIReF.

The complaint and proposal of the Tax Authority is not, moreover, the only one. In 2020, the National Commission for Markets and Competition (CNMC) found that "after the increase in the bonus, there was a sharp increase in demand from travelers residing on the islands, which pushed up average prices of tickets on flights to the Peninsula".

This, therefore, made tickets more expensive for non-residents, "who altered their consumption patterns to protect themselves from price increases: they bought them earlier and traveled more on low-cost companies."

Competition already proposed at that time to "evaluate measures to increase sensitivity to the price of resident passengers", such as "indicating the total price of the ticket next to the subsidized price, liquidating the aid a posteriori, establishing limits to the subsidized amount or limiting the subsidized concepts of the tickets".

He also called for "adopting an overview of all aid to compensate for insularity, given that the bonus for residents coexists with other measures", and even "assess other possible aid mechanisms to compensate for insularity".

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