Latin American airlines are weathering the impact of the Covid-19 crisis, albeit with some losses. The basic elements are mergers and their expansion plans. In the past 18 months, three of Latin America’s largest airlines have avoided bankruptcy. Such was the case with Chile’s Latam (which formed a joint venture with Delta in 2022 that raised $1.9 billion and now plans to open 36 new routes), Avianca (Colombia) and Aeroméxico. Others like Brazil’s Gol (American Airlines bought 5% for 200 million last year) and Azul managed to refinance their debt and ease creditor pressure.
Although the economic balance mixes green and red. The IATA (International Air Transport Association) expects airlines to achieve a net benefit of $9.8 billion this year. At other heights – the airlines of Latin America and the Caribbean – will lose more than $1.4 billion, nearly $5 per passenger. This year four airlines – Aeromar, Viva Colombia, Viva Air Peru and Ultra Air – have stopped flying due to financial problems. Despite these red numbers and the closures, “demand remains strong, airlines are managing capacity well and operating results are allowing them to recoup some of the large losses from the pandemic,” summarizes a spokesman for data analytics firm OAG. (Official Aviation). Guide).
The compass generally marks a better course. As of June 2019, occupancy in the region was 657 miles (1,057 kilometers) per seat. In the same month of this year, it rose to 669 miles (1,076 kilometers). It is true that in this journey of numbers, the number of flights has decreased (from 198,725 in 2019 to 190,012 in 2023). Although the explanation is simple. Operators use larger devices. There are currently 152.8 seats per route; Previously – this summer month – they had 135.7 recommendations. “It’s strong growth,” says Mike Arnot, spokesman for specialist consulting firm Cirium. And he adds: “The Latin American market recovered the fastest, returning to pre-COVID-19 levels.” The region has a growing middle class and a high operator footprint [Azul, Gol, Jet Smart] Low costs”. For once, the good news is piling up like newspapers waiting on your doorstep. “However,” the BA warns, “after the holiday it will be very important to see if the business traveler returns.”
The battle takes place between regional and international competitors. “Lufthansa and Air France-KLM are beginning to dominate this space, with low-cost airlines facing strong competition,” Adrian Neuhauser, CEO of Avianca, told the Financial Times. you need size In search of this dimension, the newly formed group Abra Group (a Latin American holding company founded in 2022 by Avianca and Gol themselves) faces the big European companies. This phenomenon of operator consolidation stabilizes the offer and choice of travellers.
“If we compare bus fares with air travel as the main mode of transport in each country, the differences are limited and there are countries — think Mexico and Colombia — that have routes to which it’s even cheaper or almost the same as traveling by air ‘ said José Ricardo Botelho, CEO of the Latin American and Caribbean Air Transport Association (ALTA). In his opinion, the problem arises with taxes and tariffs. Many routes have an average fare of $45, but nearly a third, he says, is taxes and fees. You just have to climb the steps of certain buses. Traveling between Bogotá and Medellín is possible in two ways. The bus ride takes 11 hours; the plane, just one. The airfare is $29.69; Freeway, $27.77. This last mode has a fee of $1.3 (€1.1) while the plane costs $19.88 (€17.2). The percentages clear the way. Taxes and fees for the bus is 5%, for the plane it is 67%.
taxation
The same complaint is also being heard in Mexico. “There are situations in the country where taxes and surcharges account for 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 travel within the region. And Ecuador chose the same path. He lowered his taxes to attract travelers. In Mexico it seems we need to get back on track. In the space of a decade, the average domestic round-trip ticket price has fallen from a peak of $158 in 2011 to $66. And the connection with Madrid alone has 434 frequencies, i.e. four cities. According to the consulting firm McKinsey & Company, the Panamanian Copa Airlines is pursuing a millimeter strategy. Narrow body aircraft with more than 80 destinations in North and Latin America.
Despite some emergency landings, there is ambition in the sky. For example, in May, regulators barred Avianca’s purchase of Colombian airline Viva Air. Despite the setback, the idea of creating a regional behemoth is obvious. The scope is huge. In Latin America – says Peter Cerdá – it is hardly “0.45% of the population [660 millones de habitantes] He travels once a year. Nobody wants to stay without taking off. Iberia, which begins its winter season on October 28, has scheduled 14% more flights to the region.
Mexico flies higher than Brazil
Every country is a world in the air and on land. Mexico has overtaken Brazil as the largest market, with first-quarter passenger numbers up 17% from the same period in 2019. Colombia — according to the Financial Times — is still seeing high growth, but so are Brazil, Argentina, Chile and Peru is below the level of four years ago. Still, major airlines see a future of higher earnings as stocks recover from the bottom. It is inexcusable that we are thinking of an industry in transition. “Airlines need to become a bionic organization that combines the best of their human experience with the most advanced technology,” advises consultancy BCG.
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