The biggest problem facing Latin America's airlines is excess capacity in small markets, according to one of their prominent leaders.
Federico Bloch, chief executive of Grupo TACA, told his colleagues at the recent AvNews CEO Conference in Miami that Latin aviation is "in shambles" because "the big fundamentals are flawed".
During the recent strike at Aerolineas Argentinas and its subsidiary, Austral, Bloch notes that other Argentine carriers still did not operate with full loads. "This is true of the whole region," Bloch says. Excess capacity, he adds, "creates lots of marginal pricing. In fact, the whole region prices that way."
"We are all responsible for this problem," he added. "The same as in the USA after deregulation, everyone is jockeying for position." Bloch claims that airline revenue in the USA rose only after consolidation started, bringing an end to excess capacity.
In remarks that could raise eyebrows among anti-trust officials, Bloch called on all Latin carriers to start "capacity rationalisation" as the first phase of an industry restructuring. The second phase, he suggests, should be consolidation through "smart mergers".
Source: Airline Business
