Government Taxes Risk Stifling Airline Expansion, Leaders Warn

Airlines and airports are warning that government taxes and regulatory costs risk undermining air travel demand as the industry grapples with higher fuel prices and disruption from the prolonged Middle East conflict.

Speaking at Routes World 2026 in Frankfurt, industry leaders urged governments to make aviation more competitive rather than adding costs that could discourage passengers and delay new routes.

Peter Cerdá, IATA's regional vice president for the Americas and CEO of ALTA, said the first half of 2026 had been encouraging, but the outlook had become more challenging as the Middle East conflict continued.

“The last six months of the year now, it becomes a bit more critical because fuel is a significant cost, so people are now being much more watchful in terms of how they spend,” he said.

Cerdá said some airline executives had discussed fare increases of 20% or more on certain routes, while higher operating costs were prompting carriers to reconsider frequencies and expansion plans. He expects traffic to continue growing in 2027, although at a slower rate than previously forecast.

Airports are also feeling the effects. Antoine Rostworowski, world chief strategy officer at Airports Council International (ACI), said the industry entered 2026 in a strong position before conditions deteriorated toward the end of the first quarter.

ACI has since lowered its global passenger growth forecast for 2026 from 2.7% to 2.3%. Higher fuel costs are making marginal routes more difficult to sustain, potentially delaying services that airports have spent years trying to attract.

Rostworowski urged governments to recognize airports' wider economic contribution rather than treating aviation primarily as a source of revenue. He called for policies that allow airports to operate as businesses, attract investment and expand infrastructure.

More News And Analysis From Routes World 2026

ACI estimates that $4.7 trillion in airport infrastructure investment will be required by 2055, highlighting the importance of government support in accommodating future traffic growth.

Cerdá was particularly critical of the gap between governments' stated support for tourism and the taxes and charges they impose on aviation.

“There's not one government that doesn't talk about the importance of travel and tourism,” he said, referring to Latin America. “Unfortunately, if you're going to talk about it, you have to react to it. You have to take action.”

He highlighted Mexico, where he said passenger charges and fees already total about $121, with a further $10 increase proposed. On some Mexico City-Miami fares, taxes and charges account for as much as 62% of the ticket price, he added.

“Mexico in our mind is implementing the wrong policies,” Cerdá said. “Every time you add a dollar to your travel experience, you're adding it over a large amount of fees already. So, you're disincentivizing.”

He said the industry was not seeking special treatment but wanted governments to stop viewing aviation as an easy source of additional revenue.

Aage Duenhaupt, communications director at TUI, echoed those concerns.

“Travel is seen sometimes as a cash cow,” he said. “Governments use opportunities to cash in, but unfortunately the money doesn't come back to the industry.”

Tour operators are also facing higher fuel, hotel, electricity and food costs, reducing their ability to absorb increases without passing them on to customers.

Duenhaupt criticized the implementation of Europe's Entry/Exit System, citing waits of four or five hours for some passengers at southern European airports. He argued that governments should be making travel easier and more affordable rather than introducing additional obstacles.

The Middle East conflict has also created challenges for air cargo, despite some operators benefiting from disruptions to maritime shipping.

Mammen Tharakan, director general of the International Air Cargo Association, said uncertainty surrounding government trade policies and tariffs was complicating long-term network and capacity planning.

“Did we ever think, as aviation leaders and participants, we would be worried about the closures of maritime lanes and straits?” he asked.

Tharakan said tariffs were introducing “a level of unpredictability and uncertainty,” although the air cargo industry had demonstrated its ability to adapt to changing trade flows.

He added that air cargo was increasingly being viewed through the lens of trade policy, market access and national security rather than simply as a transportation service.

Cerdá warned that governments risk overlooking the wider economic consequences of making air travel more expensive. In Latin America, he said, every aviation job supports approximately 10 additional jobs elsewhere in the economy.

With fuel pressures expected to continue into 2027, airlines are likely to become more selective about where they deploy capacity, increasing the importance of competitive operating conditions.

“We need to really work closely with our governments during a challenging period,” Cerdá said. “We need to remove barriers and let the industry grow.”