Air traffic across Latin America and the Caribbean as undergone an amazing transformation over the past five years as traffic among members of the Latin American and Caribbean Air Transport Association (ALTA) has grown by a phenomenal 40 per cent. This growth has been driven by encouraging a business friendly economic environment, generating new business opportunities with the region and continuing to develop the already strong domestic markets, explained Eduardo Inglesias, executive director ALTA during a keynote address at this year’s Routes Americas Strategy Summit in San Salvador, El Salvador.
This growth has had a direct economic impact on the region and World Bank data shows that GDP has almost than trebled over the past ten years, rising from $1.8 trillion in 2002 to $5.34 trillion in 2012; provisionally figures for 2013 show this rising still further to $5.51 trillion, a 3.2 per cent growth and estimates for 2014 and 2015 see this rising still further by a forecasted 3.6 per cent and 4.1 per cent, respectively.
From a base of 89 million passengers on flights from, to and within the region, traffic grew to 206 million passengers last year, but development rates vary across the region, with Bolivia leading the way with a 25 per cent growth in 2013 versus 2012, based solely on its domestic airline sector. Other high flyers were Colombia (up 15.8 per cent), Peru (10.5 per cent), Chile (8.9 per cent) and Mexico (8.8 per cent). When you look solely at the international market it is Mexico that heads the list (up 2.5 per cent), followed by Colombia (1.1 per cent), Peru (0.7 per cent), Brazil (0.6 per cent) and Chile (0.1 per cent).
According to data from ALTA it is the Central America to/from South America market that is growing the fastest in the Americas, up 12.6 per cent over the past year, although flights within South America (up 11.4 per cent) and within Latin America (9.8 per cent) have also witnessed considerable growth. This growth has been mainly due to a growth in city pairs to, from and within Latin America and the Caribbean, rising from 2,585 in 2012 to 2,665 in 2013. Interestingly, data between the region and the rest of the world shows city pairs have grown from 687 ten years ago to 953 today.
According to Inglesias, the growth of low-cost carrier penetration across Latin America and the Caribbean has helped it achieve such strong growth, highlighting Brazil and Mexico as the markets with the largest penetration, now holding 52 per cent and 60 per cent shares of capacity, respectively. However, he noted the increasingly blurred lines between 'legacy' and 'low-cost' carriers. “How you define a LCC in Latin America depends on your mood,” he said.
Inglesias painted an optimistic picture for the future, and with strong long-term economic growth in the region, growing tourism, a high percentage of urban population and the growing low-cost carrier penetration, who can argue. The South American market is expected to drive this growth according to forecasts from US manufacturer, Boeing, which claims average RPK growth within that region will grow 7.4 per cent between 2012 and 2032. The Latin American market, flights between Central and South America and between North and South America are also forecasted to see rises of more than five per cent.
However, it is not all good news and Inglesias pointed to a number of challenges which will inhibit the Latin America and Caribbean industry growing to its full potential. Infrastructure is one key area with the spotlight firmly on the Americas region as Brazil hosts the forthcoming football World Cup and Olympic Games. “We are running the risk of not investing enough in the future,” he warned.
Other challenges for the industry include misunderstanding and inconsistent application of antitrust regulations which means local carriers struggle to compete on a level playing field with rivals from other parts of the world; an unbalanced approach on consumer rights legislations and notably unequal treatment vis a vis other means of transportation; Short-term aviation infrastructure planning and a potential shortage of skilled workers as airlines continue to grow.
However, it is government intervention that is perhaps the biggest worry for airlines in the region, according to Inglesias. There is a distinct lack of understanding of the benefits generated by the aviation industry,” he said. “We need to make it clear that every time an aircraft arrives, every seat that is occupied is someone who can bring an opportunity to the country. They are totally disengaged with reality and the services airlines provide.”
It is the same with immigration and custom requirements and the passenger processing delays they can regularly cause. “We always need to fill in forms. When we arrive we fill in two or three, when we depart we do the same,” noted Inglesias. “Just let them go and not wait two hours for an immigration officer to simply stamp a passport. After that consumer rights can kick in and we, as airlines, may have to compensate the passenger for missing their flight through no fault of our own.”