beyondbrics

Getting a plane in Latin America can often be a trying affair – and not only if you were booked on Mexico’s leading airline by passenger numbers, Mexicana, which filed for bankruptcy protection this month.

Strikes and delays are irritatingly common, airport facilities are often primitive, and nervous travellers may not want to recall that some airports still lack radars. But in a region seeing robust economic growth, passenger traffic is increasing sharply as middle-class consumers (and the employers sending them on business trips) get richer.

A comparison with more established markets underlines the trend. In the year to date passenger traffic in Latin America has grown by 10.2 per cent from the same period last year, according to the International Air Transport Association (IATA). That’s nearly double the 5.9 per cent seen in North America and even further ahead of Europe’s meagre 3.3 per cent.

Analysts say that many Latin American planes fill up immediately, and the outlook is positive too, a point that helped spur last Friday’s announcement of a tie-up between LAN of Chile and TAM, the Brazilian market leader.

LAN and TAM are already talking about offering more destinations and more frequent flights as a result of their alliance, and are looking ahead with glee at the opportunities presented by the 2014 World Cup and 2016 Olympics in Brazil.

“It’s all about the economy,” says Robert Booth, chairman of airlines consultancy AvGroup.

“Latin American airlines headed up the worldwide list of profitable carriers in 2009.

Brazil, Colombia, Peru, Argentina are growth markets … and demand for air transportation is historically twice the GDP growth,” he says.

Indeed, Latin America is the only region in the world to post aviation profits two years in a row – quite an achievement given the global slowdown and the fact that 2009 is considered the worst year for the industry since World War Two.

Part of the reason for strong passenger traffic growth in Latin America is that demand is bouncing back after recession and the H1N1 flu epidemic last year, which originated in Mexico.

In the business travel segment, the fastest growing route in the world was Central to South America, with a 40 per cent rise in June traffic compared with the same month last year, according to the IATA.

Mexico City’s international airport has 440 departing flights a day and is the busiest in departures in the region, while Bogota’s El Dorado airport is growing at the fastest rate – 16 per cent more than last year, according to the Latin American and Caribbean Air Transport Association.

No surprise, then, that Colombia’s Avianca airline last year tied up with Taca of El Salvador, positioning themselves for growth within the continent.

More consumer demand is expected to drive more airlines into each other’s arms, but not, necessarily, to spur more low-cost airlines in Latin America. Brazil’s Gol has proved they can succeed, but at this stage of the consumption story at least, they remain a minority phenomenon.

This post is part of a two-week special series on emerging market consumers.

Related reading:
Cheap flights lure Brazilians off the bus, FT

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