Latin America; Airline Market Outlook 2020

October 17, 2019

The Market

The Latin American airline industry of 2019 bears little resemblance to what it was at the turn of this century. The industry is now generating $156 billion in GDP (expected to reach $322 billion by 2034), supporting 7.2 million jobs and connecting the region with 160 global cities on 2.6 million flights per year. Since 1990, ticket prices have dropped dramatically by 64%, while the travel options have increased due to the rapid expansion of LCCs like Spirit, Volaris, InterJet, VivaAerobus, JetBlue, Azul, Gol, Sky Airline, JetSmart, Fly Bondi among others. For instance, in Brazil and Mexico LCCs are dominating the majority of their domestic traffic with 65%.

 

LCCs will strengthen their expansion within markets previously not viable (international routes), as new aircraft models like A320neo and A321XL have now the capability of operating longer routes with improved cost performance. As example, JetSmart the ultra-low-cost airline in Chile has the most modern fleet in the American continent with numerous A320-200 and new A320neos and A321XLs delivered between 2019-2020. Furthermore, the international routes to lower South America have been dominated and strengthened now by the strategic business alliances between full-service carriers AA/DL, AV/CM/UA, LA/IAG group.

 

Al the above factors have doubled passengers over the last decade and with an estimated annual growth of 3.6% by 2037 (chart below by IATA).

 The Challenges

According to IATA, one of the biggest challenges in the region for 2020 is the profitability per passenger (p.p) in comparison to the rest of the world. Airlines in North America reached $16.77 p.p, in Europe $6.40 p.p, Asia Pacific $6.15 p.p, Middle East $3.33 p.p and in Africa a concerning negative balance of -$3.51 p.p.

Although airlines in the Latin American region increased their profits p.p by around 65% from $1.41 in 2018 to $2.14 in 2019, this is just enough for a cup of tea in many of these places, and it is less than half of the global average of $7.76 p.p. On top of this, should there be any increase in the cost of fuel, or a new tax implemented which is likely in this politically unstable region, this will surely squeeze further these thin profit margins.

 

Brookfield’s Leading Position

We have overcome the above challenges and since 1993, we have been the strongest and primary partner in Latin America of numerous Flag Carrier, LCC airlines and Latin American pilots. We have successfully found jobs worldwide for thousands of Latin pilots and have provided a vast number of expat talent including qualified pilots, engineers and senior management personnel to our Latin airline clients on virtually all commercial aircraft. Our solid background speaks loudly with our strategic partnerships and successful projects traced back to 1995 with Aerolineas Argentinas, Faucett Peru and ACES Colombia. Over the last 6 years, we have differentiated ourselves competitively from any other competitor, by hiring the best talent from Latin America for our offices worldwide, and by opening offices in Colombia to increase our customer service and support with almost 24/7 coverage to clients between local offices (Colombia), head office (UK) and South East Asia (Vietnam). This competitive advantage has led us to successful projects with the best airlines in the region; Avianca Holding in Peru, Colombia, Salvador, and Honduras, with Fly Bondi in Argentina and more recently with the ambitious expansion of Sky Airline and JetSmart in Chile.

 

We continue growing and evolving with the promising airline industry in the region, however, to accelerate the thrust of the aviation engine to lift the economic growth, smart actions are urged from governments in regards to regulations about the air transport industry, as the region is still affected by political instability and protectionist civil aviation authorities.  

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