Nearshore Americas

Buckle Up: Air Travel to Latin America Likely to Improve

JetBlue’s expansion is pressuring global carriers

By Narayan Ammachchi

Despite a number of US carriers  introducing new flights to Latin America,  and the economic firestorm that’s kicking up in the region, landing a seat on a Southbound airliner remains a major headache for thousands of U.S. business travelers.  And far too often, in the minds of many, all routes should not always have to go through Miami.

Whether it’s complicated routing, or high fares, many frequent flyers complain that there just aren’t as many options as there should be for such an important and strategic region. However, the good news is that carriers like JetBlue, Avianca and Copa are rattling the dominance of global operators – and giving way to more options to places like Barranquilla, Santo Domingo and El Salvador. (Just today Jetblue in fact announced plans to offer service to Medellin.)

The fact that big carriers like American Airlines and Delta shuttle many U.S. passengers through transit points in Miami and Atlanta is suddenly becoming a point of competitive weakness.

“A whole business day will be spent for reaching Miami. Lack of flights from different regions of the United States is the biggest hurdle,” said Jeff Pappas, Executive Vice President at Arledge Partners, in Dallas.

Adding to their trouble is Countries like Brazil and Argentina have not fully opened up their airspace to foreign carriers. For example, low-cost carriers like JetBlue cannot add routes to Brazil because of lack of treaties between the United States and Brazil. According to Pappas, many business executives have curtailed  their visits to LatAm facilities due to high air fares.

Passengers and Airlines

High fares have been blamed on the high cost of fuel. Yet high fares seems to be surmountable issue given that the amount of airlift -overall – continues to grow.

A study jointly conducted by the Air Transport Action Group (ATAG) and Oxford Economics forecasts that passenger numbers in LAC countries will triple from 145.9 million in 2010 to 438.9 million in 2030. According to International Air Transport Association (IATA), a trade-group representing airlines and travel agents, Latin American carriers are expected to post a collective profit of some $400 million this year, an increase of $100 million compared with their profit for the year 2011.

Even in Latin America, aviation companies are streamlining their operations and keeping pace with the expansion of local economies.

Brazil, the region’s biggest economy, has seen passenger numbers double over the past decade.

Rising number of passengers has certainly prompted many US carriers to introduce low-cost flights to the region, with most of them focusing on tapping into the region’s growing middle class population.

While JetBlue has just added routes to Colombia, Southwest, which owns AirTran Airways, flies to Mexico, the Dominican Republic and half a dozen Caribbean countries. And Delta Air Lines, in the meantime, has announced that it is moving its commercial headquarters for Latin America and Caribbean services from Atlanta to the Brazilian city of Sao Paulo. Spirit flies to every country in Central America with the exception of Belize.

Delta, the world’s second biggest carrier by passenger traffic, is doing all it can to make air travel easier between the US and Latin America. In August, Delta reached an agreement with Grupo Aeromexico and added more routes to South America. Delta also has cross-selling deals with Aerolíneas Argentinas, an Argentinean carrier.

Even in Latin America, aviation companies are streamlining their operations and keeping pace with the expansion of local economies. Earlier this year, Chile’s LAN airline took over Brazil’s TAM, creating the world’s second largest airline by market value. This merger, analysts say, reflects the impressive growth in the region’s aviation sector.

The emergence of low-cost carriers in Mexico such as Interjet, Volaris and VivaAerobus is also good news for US citizens who frequently fly to Latin America. Volaris operates flights to ten cities in the United States and VivaAerobus to three. Interjet has flights to four American cities as well as Guatemala City, San José in Costa Rica and Havana.

Economy and Airports

Brazil, which is hosting the football World Cup final in 2014 and the Olympics two years later, is quickly privatizing its airports and investing a huge sum of money in infrastructure. Such investments are boosting economies and giving jobs to citizens.

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The ATAG report said that in Latin America and the Caribbean more than four million jobs, and $107 billion in GDP, are supported by aviation sector. In Latin America alone, aviation is responsible for 2.4 million jobs.

“In Latin America and the Caribbean alone aviation directly employs over 465,000 people. If we include indirect employment, this increases the regional figure to 4.6 million jobs,” said Paul Steele, Executive Director of ATAG, in a press release recently.

Governments in the region are bolstering their aviation sector. Last month, Colombia opened its brand new El Dorado airport in Bogota. Brazil has plans to invest about $562 billion on infrastructure between 2011 and 2014 as part of a scheme known as the “Accelerated Growth Program”.

But not all the countries in the region have woken up to the need. There are very few airports in countries like Guatemala. Higher fuel costs, onerous airport fees and currency volatility are also playing their part to hinder the growth in aviation industry.

Therefore, global aviation associations – including IATA, Airports Council International, Latin American and Caribbean Air Transport Association and the Civil Air Navigation Services Organization –signed a declaration this week calling on Latin American governments to develop the aviation infrastructure in line with global standards.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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