beyondbrics

What is it about airlines? Like football teams, they can be trophy investments, holding a value beyond their balance sheet.

Despite all the woes in the global airline sector, Ollanta Humala, Peru’s new president, wants to create a national carrier with the participation of private investors.

The airline would cater for the domestic markets, including farflung corners of the Andes and the Amazon that are not profitable, he says.

Colombia has Satena, controlled by the Colombian Air Force, which has been subsidised to fly Colombians to lesser-known points such as Mitú and Ipiales since 1962.

Whatever formula Mr Humala comes up with, a Peruvian state airline would be taking on LAN of Chile, which currently has 60 per cent of the domestic flights market; Taca/Avianca; and Star Peru.

Then there is budget carrier Peruvian Airlines, which has increased its share of six local routes rapidly since it launched in 2007.

Mr Humala’s administration suspended Peruvian Airlines’ operations on Thursday for 90 days for not meeting safety standards, leaving hundreds of passengers to find seats with Star or Taca (tickets will be reassigned subject to availability, as long as they offer the same routes at no extra cost).

The ministry of transport cited an August 2 incident, in which one of Peruvian Airlines jets had to make an emergency landing, as a key cause of concern.

If Peruvian Airlines can’t convince the new administration of its safety standards, there will be even less pressure on LAN or its rivals to lower fares. Mr Humala hasn’t talked about how or when he might introduce his airline, but it is very definitely on his agenda.

Related reading:
LatAm airlines fly high on consumer demand, beyondbrics
LAN-Aires deal heats up frequent flyer turf war, beyondbrics
Cheap flights lure Brazilians off the bus, FT
Mexicana: a troubled player in a turbulent market, beyondbrics