Ultra-low-cost carriers continue to largely steer clear of Brazil, highlighting economic and regulatory challenges that are particularly acute in the country but also common throughout South America, a top IATA official has argued.
Speaking on 14 February during Routes Americas in Las Vegas, Peter Cerda – IATA's regional vice-president for the Americas – noted that low-cost carriers had expanded in other South American countries, but less so in Brazil.
He cites airlines such as VivaColombia, Colombia's Wingo and Mexico's VivaAerobus, plus prospective start-ups like Argentina's FlyBondi and Chile's Jet Smart.
"There is [low-cost] interest in markets like Chile, Argentina, Columbia [and] Mexico, but we are missing the mega country that is Brazil," Cerda says. "There is a lack of appetite at this time because of how bureaucratic – how difficult – it is to do business in that country."
Speaking to FlightGlobal, Cerda describes Brazil as the "problem child" of the region.
"It's the largest country, the largest economy. If we are able to straighten that economy out over the next couple of years, if the middle class can grow, we are talking immense opportunities for the industry," says Cerda.
Insufficient infrastructure, excessive regulation, economic woes and political instability are affecting airlines throughout South America, Cerda notes.
Latin America's airlines earned combined profits of about $100 million last year, and IATA predicts that the carriers will earn $80 million in profits this year.
US carriers, meanwhile, earned combined profits of nearly $23 billion in 2016 and are set to earn $18 billion in 2017.
Hence there is a "large disparity between what's happening in North America and what's happening in South America", says Cerda.
Some countries' aviation sectors are poised for expansion but face barriers, he argues.
For instance, Argentina remains "highly over-regulated" and Peru is undergoing major political changes, Cerda observes.
"We have an airport that 15 years ago was the superstar of the region," he says of Lima Jorge Chavez International airport. "Now it is an over-capacity airport."
Some governments in Latin America still view aviation as an "industry for the rich and a perceived cash cow", Cerda contends.
He warns that "if we continue to be over-regulated, over-taxed and not have the right infrastructure, then Latin American carriers will not be able to compete with the rest of the world".
Source: Cirium Dashboard
