Broadly, airlines in the Americas posted solid growth in traffic demand and increasing revenues. “Brazil, Colombia, the Dominican Republic, and Mexico all had record years in aspects of air connectivity,” says Peter Cerda, IATA’s Regional Vice President for the Americas. “The improvements were driven to a large degree by pent-up demand, with the region becoming more attractive to travelers thanks to new connections.”
Both international and intra-regional networks have developed significantly since the pandemic. Key routes, such as Bogota-Madrid or Mexico City-Madrid are now served by multiple flights per day, offering departures every three hours on average. Intra-regional connectivity, meanwhile, is overcoming previous shortfalls with more direct connections, particularly between secondary cities.
Although IATA is predicting a $0.4 billion loss for the Latin American region in 2024, airlines are generally in better shape. Those that went through Chapter 11 have come out stronger, leaner, and better able to compete on the global stage. And those going through the process now are also expected to emerge more competitive according to reports.
Time-honored challenges
Meanwhile, Latin America remains an expensive operating environment, and there are no significant signs of improvement on the horizon.
There are even countries backtracking on earlier decisions, such as Ecuador where the new government is reintroducing taxes and fees that the previous administration reduced to stimulate the market. As a result, travel to Ecuador will become more expensive, ultimately impacting connectivity.
Consumer protection regulation is also on the agendas of many governments, including the Canadian administration. “They are all being short-sighted,” says Cerda. “What they think will protect consumers in fact just makes it more expensive to travel because airlines have to factor in the cost. Airlines compete and that means looking after the customer is a priority. They don’t need to be reminded of this through clunky regulation.”
Mexico is discussing banning overbooking. Yet this is an important tool for airlines because of no-shows. Passengers are compensated should they not be able to board a booked flight and banning overbooking would again lead to additional cost.
Moreover, most currencies are competing against a strong US dollar (USD) and a significant proportion of airline expenses, including the big-ticket items, are in USD.
Among the opportunities on the horizon is the region’s incredible diversity in nature, providing plenty of feedstocks for sustainable aviation fuels (SAF) production. Yet, there are no SAF production facilities online in Latin America. One is due to open in Paraguay later in 2024 but 95% of its SAF has already been sold to other industries.
“There are discussions taking place about SAF production in many countries but there is nothing set in stone,” Cerda informs. “That means a new facility is at least 6-8 years away when the need is now. Even in the United States, where the administration has incentivized SAF, only California is doing a good job. The other states are way behind.”
Infrastructure
As for infrastructure, the robust traffic growth experienced across the Americas has highlighted the lack of facilities.
New terminals have opened, but almost immediately are operating close to maximum capacity. Bogota, Mexico City, and Sao Paulo all have relatively recent terminals that have already reached saturation point.
“Capacity is a priority for all the key airports in the region,” says Cerda. “And as we improve secondary city connectivity then we must build new terminals in secondary airports too. We need a clear plan for the future.”
The lack of capacity affects customer services. Although investment in new technology is helping, security and border control are chokepoints in many Latin American countries. Cerda says this is negatively affecting the travel experience and governments must do more to help airlines offer passengers a fast, efficient, and reliable service.
Government collaboration
Overall, advises Cerda, aviation in Latin America is heavily regulated, heavily scrutinized, and heavily taxed. Railways are far and few between, so aviation’s main competition are busses, which, in contrast, aren’t regulated, get financial assistance, and are not held accountable if they fail to provide a service….
