Macroeconomic conditions in Latin America of late have been challenging, but ALTA executive committee president Hernan Rincon believes that the region still holds significant promise.
"Airlines continue working to overcome this turbulence, and we do it convinced that the future of the industry has a huge growth potential in Latin America," Rincon, who is chief executive of Avianca, tells FlightGlobal ahead of this month's ALTA Leaders Forum in Panama City.
High fuel prices and challenging economic conditions have cast a shadow over the operating environment for the region's airlines. Currency devaluation has been a concern in countries like Argentina and Mexico, dampening demand for overseas travel, airlines have pointed out.
Most of the region's airlines have taken action, such as capacity cuts and curtailing fleet growth, to cope with the uncertainty ahead. Most recently, Aeromexico announced it was suspending several routes, phasing out aircraft and launching a cost reduction programme.
Despite the challenges faced by the region's carriers, Rincon highlights the progress that Latin America's aviation industry has made in 2018.
"We now have a more robust aviation industry that enables to keep developing the tourism sector, which has attracted increasingly international traffic. Considering that we carry close to 50% of tourists flying into Latin America, we are committed to generating connectivity and choices," says Rincon, who became ALTA president in November 2017.
There is potential for stronger growth ahead, he believes. "We expect to double the number of transported passengers in the next 10 years, 250 million passengers approximately," he says.
The penetration of air travel is Latin America is relatively low compared to other regions, points out Rincon. "When comparing traffic per capita, in the so-called developed economies people travel between 2.0 and 2.5 times per year, while in Latin America, people get to travel 0.4 times per year," he says, adding that there is a "gigantic opportunity to grasp" by airlines.
In recent years, several countries in the region have made significant progress in growing air travel, Rincon points out. Chile, for example, became the first country in the region to achieve one trip annually per citizen. In 2017, Argentina opened the door to more airlines to operate domestic flights, which has "revolutionised the market", adds Rincon.
While airlines continue to make headway in growing connectivity, there remains a need to convince the region's governments on the value of aviation. "A cross-country regulatory framework to promote growth" remains one of ALTA's top priorities, says Rincon.
"This is fundamental for the industry as there are too many regulatory interpretations in each country, which is an unnecessary constraint," he says. "A more homogenous regulation is needed urgently, to allow us to work as a single industry and avoid our resources and conditions to vary at each airport."
Excessive taxation and poor airport infrastructure also rank among ALTA's focus areas in Latin America.
With higher fuel prices already a challenge, increasing airport fees further impact airlines' ability to stimulate demand, says Rincon.
"We are making an effort to let governments in Latin America know that the aviation industry is not an industry they must tax, but an industry that promotes economic and social development in our territories by allowing them to be connected," he adds.
Proactive investment in airports is also needed in the region to meet the needs of a growing market. Latin America is one of the regions where investment in airport infrastructure is lacking, says Rincon.
"During the past decade, investment in infrastructure accounted for 3% of the GDP in some countries, while institutions such as the World Bank recommend that infrastructure investment should represent at least 6% of the GDP," he says.
"If we want to continue increasing air traffic in the region, aviation infrastructure must continue to grow at the same rate and foresee its needs."
Source: Cirium Dashboard
