Latin American airlines are leaving behind the impact of the covid, although with some casualties. The basic elements are mergers and their expansion plans. In the last 18 months, three of the main airlines in Latin America have escaped bankruptcy. This was the case of the Chilean Latam (it created a joint venture in 2022 with Delta that injected 1.9 billion dollars, and now plans to open 36 new routes), Avianca (Colombia) and Aeroméxico. Others like the Brazilian Gol (American Airlines bought 5% last year for 200 million) and Azul managed to refinance their debt and reduce creditor pressure.
Although the economic balance mixes green and red. The IATA (International Air Transport Association) calculates that the airlines will obtain a net benefit of 9,800 million dollars (about 9,000 million euros) this year. At other heights —the airlines of Latin America and the Caribbean— will lose more than 1.4 billion, almost five dollars per passenger. This year, four companies no longer fly —Aeromar, Viva Colombia, Viva Air Peru and Ultra Air— due to financial problems. Despite these red figures and the closures, “demand continues to be strong, airlines manage their capacity well and operating results allow them to recover part of the large losses from the pandemic,” summarizes a spokesperson for the OAG data analysis firm. (Official Aviation Guide).
The compass, generally speaking, marks a better course. As of June 2019, occupancy in the region was 657 miles (1,057 kilometers) per seat. In the same month this year it rose to 669 miles (1,076 kilometers). It is true that in this journey on figures, the number of flights has dropped (from 198,725 during 2019 to 190,012 in 2023). Although the explanation is simple. Operators use larger devices. There are currently 152.8 seats each way; before —in that summer month— they had 135.7 endorsements. “It’s a lot of growth,” says Mike Arnot, spokesman for the specialized consultancy Cirium. And he adds: “The Latin American market was the fastest to recover and return to pre-COVID-19 levels. The region has a growing middle class, along with a high presence of low-cost operators (Azul, Gol, Jet Smart). For once, the good news piles up like newspapers waiting at your doorstep. “Although,” they warn the OAG, “it will be very important, after the holidays, to see if the business traveler returns.”
The fight is between regional and international competitors. “Lufthansa and Air France-KLM are the ones that are beginning to dominate this space, with low-cost airlines competing strongly,” says Adrian Neuhauser, CEO of Avianca in the Financial Times. You need size. In search of that dimension, the newly created group Abra Group (a Latin American holding company conceived in 2022 by Avianca and Gol itself) stands up to the large European firms. This phenomenon of consolidation of operators stabilizes the offer and the choice of travelers.
“When we compare the bus fares against the plane as the main form of transportation in each country, the differences are limited and there are nations —think of Mexico and Colombia— that have routes where it is even cheaper, or almost the same, to travel by plane” reflects José Ricardo Botelho, CEO of the Latin American and Caribbean Air Transport Association (ALTA). The problem – in his opinion – arises with taxes and rates. Many routes have an average price of $45, but almost a third—he criticizes—are taxes and charges. You only have to climb the steps of certain buses. A trip between Bogotá and Medellín is possible in two ways. The bus takes 11 hours; the plane, only one. Airfare is $29.69; highway, $27.77. To this last mode, fees of 1.3 dollars (1.1 euros) are applied, while to the plane, 19.88 dollars (17.2 euros). The percentages clear the way. Taxes and fees for the bus represent 5%, but the aircraft supports 67%.
That same complaint is heard in Mexico. “In the country, there are situations in which taxes and surcharges represent 44% of the total price of the ticket,” says Peter Cerdá, IATA Regional Vice President for the Americas. Barbados, for example, has cut taxes by 20% to encourage intra-regional travel. And Ecuador chose the same path. He reduced his taxes in order to attract travelers. In Mexico, it would seem that we have to get back on track. In a decade, the average ticket price for a round-trip domestic flight has fallen from a peak of $158 (143 euros) in 2011 to $66 (60 euros). And only the connection with Madrid has 434 frequencies adding up to four cities. The Panamanian Copa Airlines —according to the consulting firm McKinsey & Company— exhibits a millimeter strategy. Narrow-body aircraft with more than 80 destinations in North America and Latin America.
There is ambition in the skies, despite some forced landings. For example, the regulator in May prohibited the purchase of the Colombian carrier Viva Air by Avianca. Despite the setback, the idea of creating a regional colossus is evident. The margin is huge. In Latin America —says Peter Cerdá— barely “0.45% of the population (660 million inhabitants) travels once a year”. Nobody wants to stay without taking off. Iberia, which begins its winter season on October 28, has planned 14% more flights to the region.
Mexico flies higher than Brazil
Each country is a world in the air and on land. Mexico has surpassed Brazil as the largest market, with a number of passengers in the first quarter that was 17% higher than the same period in 2019. Colombia —according to the Financial Times— still maintains high growth, but Brazil, Argentina, Chile and Peru are below levels of four years ago. Even so, the big carriers see a future of more income as shares bounce from the bottom. It is inexcusable that we contemplate an industry in transformation. “Airlines will have to become a bionic organization, combining the best of their human experience with the most advanced technology,” advises the BCG consultancy.
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