Immense territories with some of the most populous countries on the planet, such as Brazil and Mexico, and a ground infrastructure that is still often deficient... These are the factors that have contributed to the growth of air transport in Latin America. So it's hardly surprising that some of the airlines operating in the region are among the oldest in the world. For example, Colombia's Avianca was founded in 1919, Mexicana in 1921, and Brazil's Varig has just celebrated its 80th anniversary.
Perhaps it's because of the pioneering spirit that Latin America seems to be such a fertile breeding ground for new airlines. Companies appear, disappear and change owners in twists and turns worthy of the best Brazilian telenovelas. The sale of Aeromexico is a case in point. Aeromexico had been managed for several years by Cintra, to which Mexicana belonged; the two companies separated in 2005, following the sale of Mexicana. Last August, Mexicana offered to acquire Aeromexico and merge with it. In the end, Aeromexico was sold in October to another group backed by Citibank. But Mexicana has already announced that it has not said its last word... In fact, in Latin America, national carriers are often on the verge of bankruptcy, but they are often saved at the last minute. This was the case for Aerolineas Argentinas (2001-2002) and more recently for Brazil's Varig (2006). Only Venezuela's national airline, Viasa, was wiped out by the economic crisis and, it has to be said, by some very risky management (1997). As a result, each country has an average of three or four airlines, including the least populous countries. For example, Uruguay - population 3.5 million - has four airlines!
ALTA, the Latin American Airline Association, brings together the 36 largest airlines in the region, representing 92 % of total passenger traffic in the region. In 2006, this translated into some 93.5 million passengers, an increase of 3.9 %. The first eight months of 2007 show a recovery in traffic, with passenger numbers up by almost 7 %. With Aerolineas Argentinas reintegrated into ALTA, the latter has every chance of reaching the 100 million passenger mark by the end of the year.
Aeromexico dominates in the north
This multitude of airlines could confuse travellers. In fact, two very large markets dominate the region: Mexico to the north and Brazil to the south. Of the ten busiest intra-Latin American routes in 2006, five were Brazilian domestic routes and three were Mexican domestic routes. The Latino cake is actually divided between eight airlines: Aerolineas Argentinas, Aeromexico, Avianca, COPA, Brazil's GOL, the Lan group, Mexicana and TAM. In Central America, Aeromexico stands out from its rivals. With its nine million annual passengers, the airline is certainly followed by the country's other giant, Mexicana (8.5 million passengers), owned by the Posadas hotel group. But Aeromexico is the only one with a global footprint.
Mexicana flies only to the Americas and has not been part of an alliance since leaving Star Alliance in 2004. A member of Skyteam since the alliance was created in 1999, Aeromexico's network extends to Europe and Asia. It alone operates a route between Latin America and Japan. In total, Aeromexico serves 75 destinations with its fleet of 70 aircraft. It should continue to maintain its lead on international routes with the entry into service of the Boeing 787-8 Dreamliner in 2011.
Aeromexico's only potential rival in Central America is COPA. Based in Panama, it carried just 2.5 million passengers in 2006. But it has a very strong relationship with Continental Airlines, benefiting from fleet and network synergies with the US carrier. In September, the airline became an associate member of Skyteam. With flights to 41 destinations, COPA's ambition is to transform its Panama airport base into an international hub. Renamed the "Hub of the Americas", the regional hub offers some of the shortest transfer times between the north, centre and south of the American continent. The average transit time is one hour, with passengers moving from one plane to another while avoiding immigration and customs formalities.
Panama is set to gain further momentum following a code-share agreement with Air France-KLM, which will see the opening of three weekly flights from Amsterdam in March. COPA's entry into Skyteam is also reflected in a cooperation agreement with Aeromexico. The two airlines have just launched flights linking Mexico City and Cancun to the Panama hub.
The lan group dominates in the south
Competition is strongest in the south of the continent. The region is certainly dominated by the Brazilian giant, but around Brazil gravitate other airlines with major international ambitions. Starting with Colombia and its national carrier Avianca. Avianca wants to take advantage of Bogotá's position as a crossroads, halfway between Peru and Ecuador to the south-west, and Venezuela and Brazil to the east. With 7.5 million passengers carried in 2006, Avianca offers flights to 42 destinations, including 26 international ones. In 2004, the company emerged from bankruptcy with the acquisition of a Brazilian group that already controlled several airlines: Ocean Air in Brazil, VIP in Ecuador and Wayra in Peru. However, the core business of this powerful shareholder, which operates oil and gas platforms, remains Avianca. The airline wants to make a strong comeback in Europe in 2008, with flights from Bogotá to Frankfurt, London and Paris. It is also backed by Delta Airlines to join Skyteam by 2009.
European extension
However, it is up against a group with big ambitions: LAN Airlines. With a strategy reminiscent of that of Scandinavian carrier SAS, Lan Chile has been systematically buying up or creating airlines in the region since 2004, grouped together under the umbrella of LAN Airlines. LAN Chile controls LAN Peru (70 %), LAN Dominicana (49 %), LAN Ecuador (45 %), LAN Argentina (49 %), LAN Express (99 %) as well as two cargo companies, one in Mexico and the other in Florida.
Last year the group carried 9 million passengers. LAN Chile has been a member of the Oneworld alliance since 2000, and was joined this year by its subsidiaries LAN Argentina and LAN Ecuador. The company has one of the most modern fleets on the continent. It has just taken delivery of Airbus A318s for its domestic and regional network, and from 2011 it will take delivery of 32 Boeing 787 Dreamliners for its intercontinental network. In Europe, LAN Chile is due to start flying to London in 2008, its third stopover after Frankfurt and Madrid, while LAN Argentina may launch flights between Buenos Aires and Rome.
The launch of flights to Europe by the LAN group is no coincidence. The group's strong growth has been helped by the difficulties experienced by the carrier Aerolineas Argentinas. Almost bankrupt in 2001, the former regional heavyweight was bought by the Spanish group Marsans and is now starting to turn its fortunes around. Aerolineas has just announced the purchase of 61 Airbus aircraft, including the European manufacturer's two latest models, the Airbus A350 and the Airbus A380. Aerolineas Argentinas will thus be the only South American airline to include the superjumbo in its fleet. In Europe, Aerolineas flies directly to Madrid and Rome. It also operates transfer flights to Paris and London with the Marsans group's Spanish subsidiary, Comet Air.
Competition in Brazil
Then there is Brazil, a giant in both domestic and international flights. For a long time, this air power was symbolised by the national carrier Varig. But then came the shock of 2005 and 2006: with debts of more than 2.5 billion dollars, the company found itself in bankruptcy, unable to pay its creditors, in particular those who leased it the aircraft... In mid-2006, the company closed all its routes except for its Rio-Sao Paulo shuttle. There was a succession of buyers until the arrival of low-cost carrier GOL, a rising star in Brazil. In March 2007, Varig was finally taken over by GOL.
Since then, the airline has been gradually finding its feet again. Varig has six recent Boeing 767s in service on its 18 international routes, and is due to introduce Boeing 787s after 2010. The additional aircraft in particular have helped Varig's return to Europe this winter. The airline has just reopened its flights to Rome-Paris and London; it is also planning a comeback to Madrid, Milan and, at the end of 2008, Copenhagen. The on-board product on intercontinental flights has been modified, however, with the aircraft offering only a two-class configuration: business and economy.
In Europe, however, Varig has to contend with TAM, which has become one of the country's leading international carriers, in particular by taking over the traffic of its unhappy competitor. With some sixty destinations and one of the youngest fleets in Latin America (nearly 100 aircraft with an average age of seven years), TAM continues to assert its intercontinental ambitions with the acquisition of Airbus A330s, A340s and above all the future A350, for which the company has taken options for 20 aircraft. In recent months, TAM has received authorisation to serve Frankfurt, Madrid and Milan, and offers flights to five Brazilian cities from Paris-CDG. TAM is now being courted by Skyteam and Star Alliance. The airline is expected to make a decision on a future partner by early 2008.
The integration of most of the major Latin American airlines into the major alliances proves that Latin America has once again become a promising market. According to Boeing studies, average annual growth in this part of the world should be around 6.9 % over the next twenty years. This would put Latin America in second place behind China in terms of growth.
Better service on the ground and in the air
For passengers, integration into the alliances is also a guarantee of a high standard of service. The emergence of major carriers in Latin America has led to an improvement in the quality of service on the ground and in the air. For example, Aeromexico, COPA, LAN Airlines and TAM regularly appear on the list of airlines offering the best service in the region.
Most major international airports have been or are about to be renovated. On the ground, e-check-in, self-service kiosks, fast transfers and business lounges with wi-fi have become commonplace; in the cabin, almost all business classes have sleeper seats and interactive videos. All at very attractive fares, as the competition demands!
