New tax on transit passengers could lead to slower growth at Panama’s Tocumen Airport and Copa

Panama City Tocumen International Airport is planning to introduce in 2012 a transit tax that threatens to impact demand and slow down growth at the biggest hub for intra-Latin America travel. Copa Airlines, which relies heavily on transit traffic to generate one of the aviation industry's highest profits margins, is fighting the planned tax along with IATA.

Transit passengers at Tocumen are currently exempt from paying departure tax, as is the case at airports throughout Latin America and the world. But government-owned Tocumen is planning to introduce a USD2.50 transit tax while raising the current USD40 departure tax to USD42.50.

While USD2.50 is a relatively small amount and would generate only about USD6 million per year, Copa and IATA are vehemently opposed to the concept of taxing transit traffic. The fear is the tax, if implemented, would increase over time, significantly impacting demand. Tocumen three years ago doubled the departure tax from USD20 to USD40, setting a precedent for a rapid rise in fees which could be repeated with the initially small transit tax.