"The American Invasion"

What promised to be a robust discussion on the Yankee invasion of Latin America and the Caribbean was turned on its head with our panelists outlining their views on the northbound growth opportunities for airlines in the region. Mauricio Emboaba, director of planning and statistics at Gol, shared his carrier's growth plans into the Caribbean, into markets such as Aruba, Curacao, and the Dominican Republic and how Gol views the US majors - American and Delta in particular - as valued codeshare partners in the Southern Cone.

Alex Benitez, vice president for Corporate Development Grupo TACA, downplayed the impact so far of US low-fare carriers such as JetBlue and Spirit launching service into the Andean Region and Central America, indicating that their penetration has been limited to date. Instead, he shared a perspective on the substantial upside in northbound opportunities for Grupo TACA into new US markets, bypassing traditional hubs, particularly as part of the larger and recently approved Synergy Group Avianca- Grupo TACA entity.

AirTran Airways' senior director of Strategic Planning & Scheduling, John Kirby, also saw substantial growth into the region for his airline, particularly in the Caribbean, but said that airports in that region need to moderate down their rates and charges to facilitate growth. When pressed as to how low-fare carriers such as AirTran and Gol can compete on the longer-haul north/south markets, he responded by saying: "Today's LCC offering is not one that your grandparents had to suffer", going on to now featuring new and reliable airplanes, in-flight TV/satellite radio and leather seats, offerings not often found on larger legacy carriers."

So while US carriers might think they're invading one of the few remaining growth markets for aviation around the world, they should look again...there's some increased competition headed their way as well.

"Blocked Out"

Is bigger truly better? According to our panel, and the discussion that ensued, not likely. The Latin American airline industry is clearly starting to coalesce around a smaller number of airline groupings - LAN (and its affiliates), Synergy Group-Avianca-Grupo TACA and COPA/AeroRepublica to name but three. There are rumblings out there about what the other heavyweights in the region - including TAM and Gol in Brazil - might do in this regard. So, why is this happening? As one contributor pointed out, "all the research by the OEMs points to diminishing economies of scale after a fleet size of 30". The panelists generally agreed that with size comes complexity and even inertia. The panel, consisting of Francisco Cuellar, ASM's vice president of business development Latin America and Caribbean; Horst Findeisen, Star Alliance's vice president of business development; and Emilio Romano, ex-CEO of Mexicana, was of the view that the region's airlines are taking defensive measures in aligning themselves with such groupings. They also felt that other viable strategic options exist, including membership in global alliances, as a means of securing the benefits of scale without many of its issues. One member of the audience reminded everyone that the most profitable airlines in the world - AirAsia, Ryanair, and Southwest - remain independent to this day. That could be good news for the diminishing number of carriers in the region who are still independent and may be watching the consolidation game unfold with a wary eye.

And, the panel commented that while consolidation seems to be sweeping across Latin America, it's certainly not gathering any speed in the Caribbean, a region that still features too many sub-scale carriers today. As Cuellar pointed out, the big losers in the consolidation game in the region may very well be the airports, which could suffer the fate of US hubs such as Cincinnati and Pittsburgh, if they build their infrastructure around a connecting traffic base that may not survive an airline merger. So, for the time being, the sands are still shifting in the region and it won't be clear for a while who'll be left standing when the dust settles.

"The Privatisation Experiment"

The panel assembled to discuss airport privatisation in the region and the session kicked off with a title correction: "It's well past being an experiment. It's The Privatisation Experience and, by the way, it's here to stay". With that adjustment, the assembled group of experts talked about what seems to be working - and not - in terms of the privatisation stories to date. Jose Montero, director of Strategy Planning for COPA Airlines, was quick to point to the successful model in place at Tocumen International Airport in Panama City where the airport authority has worked collaboratively with his airline to efficiently expand the airport facilities in a manner consistent with the airline's growth, all while keeping rates and charges well in hand.

ALTA executive director, Alex de Gunten, cited several other airports including Santiago (Chile) for their success in this regard. Jaime Daily, CEO of Lima Airport Partners, talked about how his organisation has worked with a variety of stakeholders to fundamentally transform Jorge Chavez International Airport into an airport facility of which the city can be proud. The common denominator, according to the panelists, is the airport-airline partnership with meaningful vehicles through which airlines, which will ultimately foot the bill, can have some influence on the capital programs and their associated costs.

Carlos Criado, commercial director at Quiport, shared the challenges that have been weathered in renegotiating the airport concession agreement in Quito, Ecuador in the wake of a change in government, clearly pointing out the risks inherent in privatisation. Once again, the shifting network focus of airlines was cited as a potential risk to privatised airports, with the case of Interjet shifting much of its traffic from the recently redeveloped Toluca Airport to the main airport in Mexico City as a good example of how quickly a base load of traffic can evaporate.

Latin America and the Caribbean have been vanguards in developing and enhancing the airport privatisation model and several more countries in the region, including some very large ones such as Brazil, are likely headed in that direction. While we heard it might no longer be an "experiment", the jury is still out on who the ultimate winners and losers will be in the region's airport privatisation experience.

Michael Bell also spoke with Routes News on camera before and after the Routes Americas Strategy Forum. CLICK HERE