Latin America Aviation in 2017 Peter Harbison Executive Chairman, CAPA Centre for Aviation Cartagena, 11-Sep-2017
The global market Benign economic conditions have stimulated traffic growth Broadly profitable industry Partnerships and alliances are evolving Factors reshaping networks: New (smaller widebody) aircraft change the way route networks operate New entrant airlines and subsidiaries China accelerating internationally Uncertainty: Terrorism, Trump and Brexit This is a cyclical industry Prolonged periods of stability are rare
Latin America With 46 countries, 740 main airports and 385 airlines generalisations are difficult Economic and airline performance is improving, with considerable upside but remains fragile: 2014 -- USD700 million profit 2015 -- USD1.5 billion loss 2016 -- USD300 million profit A generally relaxed view towards ownership and control although some states are still protective Low market penetration by LCCs but rapid recent expansion (Chile, Peru, Colombia, Costa Rica)
Latin America Large potential for further domestic and short haul market growth Infrastructure and costs are increasingly a constraint on growth Domestic growth has slowed recently, due to weak economies 2016 domestic pax down 8% Internationally, US and European markets and airlines are most dominant (inbound traffic) Faster international growth International partnerships/equity investments becoming more significant (HNA-Azul/TAP, LATAM-Qatar, Delta-Aeromexico investment and JV and investment in Gol)
TOP 10 Latin America Airlines by seats Brazil s 3 major airlines generate 35% of LatAm capacity Source: CAPA Centre for Aviation, OAG
Colombia: LatAm s 3 rd largest Aircraft fleet Avianca has the largest fleet - with 140 aircraft on order Source: CAPA Fleet Database
Colombia Market growth Total market growth has been relatively stable over the past two years
Colombia International market But international has grown faster
US-LatAm: all airlines US-Latin America is dominated by US airlines with nearly 60% of the capacity
Europe-LatAM Europe-Latin America is dominated by European airlines with nearly 2/3 of the capacity 6.9% capacity to be added in 2017 Source: CAPA Centre for Aviation, OAG
Capacity to points outside LatAm %age growth Source: Airline Leader
Intra-LatAm capacity growth %age growth %age growth Source: Airline Leader
Global Alliances & partnerships LATAM has reshaped the alliance profile and its (proposed) JV with IAG and American deliver strong market power
Airlines and Subsidiaries Airlines Airlines AeroVip * Avianca Aerounion Avianca Argentina *~ Avianca Brazil Avianca Cargo Avianca Costa Rica Avianca Ecuador Avianca El Salvador Avianca Guatemala Avianca Honduras Avianca Nicaragua Avianca Peru SANSA TACA Peru LAN Airlines LAN Argentina LAN Cargo Lan Cargo Colombia LAN Colombia LAN Ecuador LAN Express LAN Peru MasAir TAM Airlines Argentina Columbia Mexico Argentina Brazil Columbia Costa Rica Ecuador El Salvador Guatemala Honduras Nicaragua Peru Costa Rica Peru Chile Argentina Chile Columbia Columbia Ecuador Chile Peru Mexico Brazil * Currently only operate charter flights ~ Due to start scheduled flights in October 2017. TAM Airlines (Paraguay) Paraguay Aerolineas Argentinas Argentina Austral Argentina Aeromexico Mexico Aeromexico Connect Mexico InselAir Curacao InselAir Aruba Aruba Volaris Mexico Volaris Costa Rica Costa Rica Copa Airlines Panama Copa Airlines Colombia Colombia Wingo Colombia Viva Air Peru Peru VivaArgentina Argentina VivaColombia Colombia VivaAerobus * Mexico Amaszonas Bolivia Amaszonas del Paraguay Paraguay Amaszonas Uraguay Uraguay DHL Aero Expreso Panama DHL de Guatamala Guatemala DHL Ecuador (TransAm) Ecuador Azul Brazil Norwegian Air Argentina Argentina
The main players Airline Airline Avianca Columbia LAN Airlines Chile Subsidiary Subsidiary Aerounion Mexico LAN Argentina Argentina Avianca Brazil Brazil LAN Cargo Chile Avianca Cargo Columbia Lan Cargo Colombia Columbia Avianca Costa Rica Costa Rica LAN Colombia Columbia Avianca Ecuador Ecuador LAN Ecuador Ecuador Avianca El Salvador El Salvador LAN Express Chile Avianca Guatemala Guatemala LAN Peru Peru Avianca Honduras Honduras MasAir Mexico Avianca Nicaragua Nicaragua TAM Airlines Brazil Avianca Peru Peru TAM Airlines (Paraguay) Paraguay SANSA Costa Rica TACA Peru Peru Licence Agreement Avianca Argentina Argentina
Regional extension/subsidiaries Airline & Subsidiaries Aerolineas Argentinas Austral Argentina Argentina Airline & Subsidiaries Copa Airlines Copa Airlines Colombia Panama Colombia Wingo Colombia Airline & Subsidiaries Aeromexico Mexico Aeromexico Connect Mexico Airline & Subsidiaries Viva Air Peru Peru Airline & Subsidiaries VivaArgentina VivaColombia Argentina Colombia InselAir Curacao VivaAerobus * Mexico InselAir Aruba Aruba Airline & Subsidiaries Volaris Volaris Costa Rica Mexico Costa Rica Airline & Subsidiaries Amaszonas Bolivia Amaszonas del Paraguay Paraguay Amaszonas Uraguay Uraguay
Latin America Aircraft orders Latin America s fleet is currently 2,343 aircraft Source: CAPA Fleet Database
Latin America Aircraft orders (LCCs) Nearly half of the orders are for LCCs Source: CAPA Fleet Database
Latam LCCs/groups Source: CAPA Fleet Database
LatAm LCC penetration
Argentina: Domestic seats/population 2016 MEXICO BRAZIL ARGENTINA 0.8 0.6 0.3 Source: CAPA Centre for Aviation, OAG Argentina s domestic airline penetration is only one third of Mexico s Government goal to double domestic traffic in four years (from 2016) Extensive long distance bus travel ripe for disruption
Argentina: Impediments to growth Protectionist policies domestically have restricted air travel Regulatory impediments and bureaucracy continue to slow potential under a new liberal policy Norwegian Air says Argentina is a hidden jewel Buenos Aires ATM needs major upgrade Infrastructure across the country needs major investment to permit market growth
Argentina: Startup proposals As at 6-Sep-2017 Argenjet Aviacion Avian Líneas Aéreas Buenos Aires International Airlines Grupo Lasa Just Flight (Royal Class) Norwegian Air Argentina Polar Líneas Aéreas Servicios Aéreos Patagónicos (Sapsa) Servicios Y Emprendimientos Aeronáuticos (Sea) Source: CAPA Centre for Aviation
Enormous market growth potential especially for LCCs. But.. Infrastructure constraints in Latin America to cost USD42 billion over the next 16 years, says IATA Who will pay? Airport privatisation? PPPs? High charges and taxes limit the potential effectiveness of new low cost services, preventing lower prices (eg Mexico-Monterrey rtn USD91 - taxes and charges USD71 = fare USD20*) Economies recovering, but still fragile Partnerships and equity investments likely to grow * Source: Skyscanner/Expedia
Thankyou Muchas Gracias!
Latin America Seats/week Brazil and Mexico are the largest markets US airlines are major players
US-Latam LCCs US LCCs account for 73% of LCC capacity
No longer foreign airlines Airline & Subsidiaries DHL Aero Expreso DHL de Guatamala DHL Ecuador (TransAm) Panama Guatemala Ecuador Airline & Subsidiaries Azul Brazil Airline & Subsidiaries Norwegian Air Argentina Argentina