Asia Pacific is the hotspot for airline industry growth and has been for a few years. But if we listen to what the experts said at the CAPA Summit in Cartagena de Indias, it might not be long before Latin America goes through its own big boom.
The case was made during many of the sessions, with speakers such as Bill Franke, co-founder and Managing Partner of Indigo Partners; Hernán Rincón, CEO of Avianca; William Shaw, Founder & CEO of VivaColombia; Eduardo Lombana, CEO of Copa Airlines Colombia and Carolina Piber, Managing Director of Expedia in Latin America, among others.
Economic growth in the region in recent years means that an increasing number of people have the financial capacity to fly, according to the panellists.
Also, there is a competitive advantage for airlines in the region. In countries like Peru, anywhere you can fly in about an hour, might take between 16 and 18 hours to get to by bus, which is the main competition for airlines in the region. “If airlines are capable of pricing their tickets right, travellers will get off the bus and on planes” was the conclusion reached by many speakers.
Some of that growth is already showing. In the last 10 years airlines have multiplied the number of seats available in the region by 3.2 times. And if we’re talking about online travel, Latin America is the fastest growing region in the world, even faster than Asia Pacific.
And there’s more to come. Bill Franke himself earlier this year announced the launch of JetSmart, an ultra low cost carrier based in Chile. It looks as if this segment, the no frills airline, will make up a good chunk of growth in the region in coming years. According to data from CAPA, 342 of the 837 aircraft orders from Latin America come from low cost carriers.
There are challenges to be sorted, though. The main one, it seems, will be infrastructure. “It will increasingly be the brick wall that stops the growth of the Latin American airline industry”. This was a common warning throughout the sessions. Passenger traffic growth in the region has been so strong in the past recent years that it has been impossible for governments to keep up.
Not necessarily because of a lack of investment, though. Colombia has invested more than two billion dollars in airport infrastructure in the last five years and every airport there seems to be under construction. During a panel with representatives from airport management companies from all over Latin America, projects to build or modernise airports in Mexico, Colombia, Peru and pretty much everywhere in the region were discussed, suggesting that infrastructure upgrades were on the way.