Low-cost air­lines slow to take off in Latam

Kuwait Times - - ANALYSIS -

Acheap flight from Paris to Madrid will set you back about $100. But it costs six times that to cover the same dis­tance in Latin Amer­ica, where low-cost air­lines are only just tak­ing off. Latin Amer­ica has long lured trav­el­ers with its his­tory, mu­sic and nat­u­ral beauty span­ning from Mex­ico’s deserts to the Ama­zon rain­for­est to the glaciers of Patag­o­nia. But air travel largely re­mains a priv­i­lege for the rich.

French cou­ple Martin Rotig and He­lene Le Bras dis­cov­ered how ex­pen­sive it is to fly in the re­gion when they be­gan pric­ing the Latin Amer­i­can leg of their world tour. The 20-some­thing ar­chi­tects, who put their lives in Paris on hold last July to travel, re­lied on low-cost air­lines to make their way across Asia. But eye-wa­ter­ing air­fares mean they will be stuck tak­ing the bus when they travel South Amer­ica next year, they said.

“We’re go­ing to take the fewest planes pos­si­ble, be­cause they’re a lot more ex­pen­sive than in Asia,” said Rotig. He rem­i­nisces fondly about fares like the round-trip tick­ets from Kuala Lumpur, Malaysia to Osaka, Ja­pan they booked for 225 euros ($235) apiece. A sim­i­lar flight - seven hours - costs many mul­ti­ples of that in Latin Amer­ica.

Travel fo­rums and tourist blogs are awash with com­ments on Latin Amer­ica’s sky-high air­fares, com­pared to those in Europe, the United States and Asia. Latin Amer­ica has few of the se­condary air­ports that low-cost air­lines love, and the dis­tances tend to be longer. The lack of a com­mon mar­ket like the Euro­pean Union also means more bur­den­some reg­u­la­tions for air­lines. Brazil, Mex­ico and Colom­bia are the only coun­tries in the re­gion with es­tab­lished low-cost air­lines. They run mostly do­mes­tic flights, at higher prices than in Europe.

“The busi­ness en­vi­ron­ment isn’t very fa­vor­able” for low­cost air­lines in Latin Amer­ica, said Ber­trand Mouly-Ai­grot, an air travel spe­cial­ist at Archery Strat­egy Con­sult­ing in Paris. “But it’s chang­ing,” he added. “You’ve got a large pop­u­la­tion pool, mostly grow­ing economies, a true mid­dle class and a de­vel­op­ing tourism sec­tor. There’s no rea­son the low-cost phe­nom­e­non, which is sweep­ing ev­ery other re­gion in the world, will not hit Latin Amer­ica.”

Sev­eral star­tups are poised to change the land­scape. A low-cost com­pany called Fly­bondi is set to launch soon in Ar­gentina with a dozen do­mes­tic routes. Its ma­jor­ity share­holder is Ju­lian Cook, founder of Swiss bud­get air­line FlyBa­boo. An­other com­pany, Viva - which al­ready of­fers bud­get flights in Mex­ico (Vi­vaAer­obus) and Colom­bia (Vi­vaColom­bia) - launched a new sub­sidiary, Viva Air Peru, last month.

One of its share­hold­ers is Ire­landia Avi­a­tion, the in­vest­ment firm of Ryanair co-founder De­clan Ryan - who has al­ready ex­ported his low-cost model from Ire­land to Asia (Tigerair) and the United States (Al­le­giant). “To­day, one in four air­line pas­sen­gers world­wide takes a low-cost flight. How­ever, Latin Amer­ica still has ex­or­bi­tant prices for very short dis­tances. It’s de­plorable,” said Wil­liam Shaw, founder of Vi­vaColom­bia. His com­pany is ey­ing ex­pan­sion op­por­tu­ni­ties in Chile, Ar­gentina, Venezuela and Cen­tral Amer­ica, he said.

Tak­ing to the skies

More than 96 mil­lion tourists vis­ited Latin Amer­ica in 2015, a num­ber set to grow by four to five per­cent in 2016, ac­cord­ing to the World Tourism Or­ga­ni­za­tion. Plane man­u­fac­turer Boe­ing is bet­ting pas­sen­ger num­bers in the re­gion will grow by 5.8 per­cent in the next two decades, said its pres­i­dent for Latin Amer­ica, Donna Hri­nak. “The ma­jor­ity of these de­liv­er­ies are ex­pected to be in the sin­gle-class seg­ment, re­flect­ing the con­tin­ued growth of low-cost car­ri­ers,” she said.

In a re­gion where tens of mil­lions of peo­ple have es­caped poverty since the turn of the mil­len­nium, “there’s a lot of po­ten­tial” for low-cost air­lines, said Car­los Ozores of US con­sul­tancy ICF. “In mar­kets where low-cost has de­vel­oped, like Mex­ico and Brazil, many cus­tomers were tak­ing buses be­fore,” he said. “Once they start fly­ing, they don’t want to go back.”

Let’s talk prices

Here are sev­eral price com­par­isons for round-trip tick­ets in Latin Amer­ica and else­where for the week of March 13 to 19.

* 1,000 km: Paris-Madrid = $106 (Transavia), Lima-La Paz = $599 (Latam)

* 2,000 km: Dal­las-Los An­ge­les = $293 (Spirit Air­lines), Rio de Janeiro-Buenos Aires = $475 (Gol)

* 3,000 km: Kuala Lumpur-Tai­wan = $86 (AirAsia), Bo­gota-Mex­ico City = $470 (Avianca)

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