Latin America is 'volatile', but has a 'very, very positive' future, why airports must become 'millennial proof' and how the failure to promote tourism in Brazil has been a 'self inflicted wound' – initial insights from CAPA’s Latin America Aviation & LCC

18 September, 2019

The Latin American aviation industry is undergoing some dynamic changes. Airport and airspace infrastructure is improving, and airline operating efficiencies are rising. Airport privatisation processes are well underway and the global alliances framework is well established. Open access arrangements are taking hold and regional economies are recovering, driving a buoyant travel demand picture.

But Latin American's full service airlines could be performing better, particularly in the mission to unlock top line revenue improvements. What are the strategies the region's airlines should be adopting, based on best practice from other regions and other sectors? Can they better leverage data, loyalty, distribution and ancillaries to produce better revenue outcomes and thereby drive improving profitability?

Meanwhile a crop of new low cost carriers continue full steam ahead, opening up exciting new markets in their efforts to stimulate traffic in the region. But like their full service counterparts, they too face their own hurdles, with infrastructure constraints, high costs and an underbanked population potential stumbling blocks to further growth.

The CAPA Latin America Aviation & LCCs Summit, returning for a third year, has this week attempted to tap into the latest industry issues and developments, challenging leaders of the Latin American aviation industry to reflect on what is needed to drive the industry forward.

The event, hosted at the Santa Barbara Beach & Golf Resort Curaçao, brought together hundreds of aviation and travel executives from airlines, airports and suppliers to explore relevant issues, as well as the commercial and operational pillars underpinning strategic decision making at local and international carriers.

Here's some initial insights from the first day of the event:

Curaçao Prime Minister: There is 'still a lot of potential for growth' in tourism
Curaçao's Prime Minister Eugene Rhuggenaath stated tourism is one of the largest contributors to the economy and employment in Curaçao and there is "still a lot of potential for growth". Mr Rhuggenaath added aviation plays a "crucial role" in tourism development and said there will be "many positive changes" in the near future for tourism and aviation in Curaçao.

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Latin America is 'volatile', but has a 'very, very positive' future
IATA regional VP the Americas Peter Cerdá stated Latin America is an "extremely volatile region" but the aviation industry is "better prepared today than ever before" to adapt to changes. Mr Cerdá said the biggest challenges facing airlines are the relationships with governments, commenting: "More regulations being imposed on our industry than ever before". But, he noted that "the future is very, very positive" for aviation in Latin America, noting the region's middle class will continue to grow, creating more opportunities.

Caravelo CCO sees 'pockets of innovation around the world' for airlines
Caravelo CCO Jonathan Newman stated there are "pockets of innovation around the world" among airlines, rather than innovation being concentrated in any particular region. Mr Newman said the airlines that focus on innovation have a drive to be better retailers, borne out of a competitive marketplace and a desire to generate better revenues.

Brazilian market can grow further if structural costs are addressed
Azul chief revenue officer Abhi Shah stated there "definitely is a structural cost of running an airline in Brazil", highlighting high fuel costs and the challenges of operating at remote airports with limited facilities. Mr Shah said there is "no question" that the Brazilian market can grow further if structural cost issues are addressed.

Currency devaluations impacting Latin American airlines
Copa Airlines SVP commercial and planning Dennis Cary stated the devaluation of local currencies in Latin America is impacting airlines by increasing US dollar denominated costs and reducing local travel demand. Mr Cary said "there are some challenges" in Argentina and other parts of South America, while conditions are stronger in North and Central America.

Airports must become 'millennial proof'
Curaçao Airport Holding senior airport operations advisor Giordano Molina stated airports must make themselves "millennial proof" by minimising passenger touchpoints and adopting a mobile first customer approach. Mr Molina said technology will be "one of the major tools" to improve and maximise travel demand.

Latin America remains 'a very divided region in terms of regulatory framework'
Latin American and Caribbean Air Transport Association (ALTA) executive director and CEO Luis Felipe de Oliveira stated Latin America is "still a very divided region in terms of regulatory framework". Mr de Oliveira said ALTA is working to deliver a more harmonised environment, which will help airlines grow. He commented that there are still "a lot of borders in the air".

Lack of passenger volume makes the Caribbean 'challenging' for LCCs
American Airlines MD Caribbean Alfredo Gonzalez stated the Caribbean is a "challenging" market for LCCs because they "thrive on volume" and few individual Caribbean markets can generate sufficient volume to sustain LCCs. Mr Gonzalez described the intra Caribbean market as "always a challenge".

Failure to promote tourism in Brazil a 'self inflicted wound'
Salvador Bahia Airport CEO Julio Ribas stated the failure to promote tourism in Brazil is "a self inflicted wound", highlighting the perception by government of tourism as elitist and the perception by potential tourists that Brazil is unsafe.

NDC 'looks good' but costly for smaller airlines
Winair director of marketing & sales and customer service Claudio Buncamper stated IATA's New Distribution Capability (NDC) "looks good" but the implementation of multiple APIs can be costly, particularly for smaller carriers.

LOOK OUT... Exclusive executive interviews from Curaçao will be published on CAPA TV in the coming weeks, as well as full coverage of the agenda sessions.

LCCs more aggressive in adopting new technology
Bluebox Aviation Systems CEO Kevin Clark stated LCCs are more aggressive than full service carriers in adopting new technology, because LCCs see new systems as a contributor to revenue and a way to open new revenue options.

'Forecast is positive' for Brazilian domestic market
GRU São Paulo International Airport head of airline business João Pita stated "we see the growth coming" and the "forecast is positive" for the Brazilian domestic market. Mr Pita noted signs of a "sluggish" international market, which has been affected by devaluation of the Brazilian real. Mr Pita also noted that Brazil is "not an easy country to do business".

Latin America's emerging middle class to drive tourism demand
Copa Airlines SVP commercial and planning Dennis Cary stated the emergence of the middle class in Latin America will continue to build demand for tourism.

Trust between airports and airlines important in route development
Curaçao Airport Partners director marketing, air service and tourism development Peggy Croes, stated trust between airports and airlines is important in route development, commenting that it is "important for the airline to feel comfortable" and confident that the route will be profitable. Ms Croes added that it is "very important to have good relationships with all your partners".

Fraport Brasil 'very upbeat' on Brazilian market, but costs are 'very high'
Fraport Brasil COO Sabine Trenk stated Fraport Brasil is "very upbeat" on the Brazilian market, which has "huge potential". However, Ms Trenk noted that entering the Brazilian market is "very difficult" due to regulation and the costs of operating in the country are "very high".

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CAPA - Centre for Aviation members were able to see live updates from the CAPA Latin America Aviation & LCCs Summit and have access to over 100 briefs from the event. Find out more about how a CAPA membership provides a front row seat to global aviation news, analysis and data as it happens, with access to a comprehensive suite of tools that can be customised to your needs.[/perfectpullquote]