Peru is reverting to conditions common in the 1990s before AeroContinente ran almost everyone out of business – a sky full of small, under-capitalised airlines with older jets.
Last July's collapse of AeroContinente, which became Nuevo Continente shortly before its demise, restarted this cycle. Two incumbent turboprop operators – AeroCondor and TANS – have converted to jets on expanding networks, while a swarm of startups have sought or won scheduled domestic authority.
These include Magenta Air, Peru Airlines, Wayra Peru, and at least one applicant who has not revealed its name. In addition, Spain's Marsans Group, which owns Aerolineas Argentinas and Chile's start-up Aerolineas del Sur, says it hopes to start a Peruvian domestic carrier, or for Aerolineas del Sur to fly within Peru.
These expanding incumbents, or start-ups, not only are after traffic that AeroContinente carried before its collapse, but they are responding to government initiatives designed to boost domestic aviation. AeroContinente once controlled 67% of the market. These policies, first adopted by emergency decree after AeroContinente's grounding, allow airlines to import and temporarily operate foreign-registered aircraft. More recently, new laws grant tax and other incentives to local airlines.
Carlos Palacín, president of Peru's airline association, predicts the additional seats entering the market this year will boost capacity by 40%. The likely market share scramble will see fares fall, he estimates, at least 10%.
However, the big difference between the 1990s and now is that two major incumbents with foreign support, LanPeru and TacaPeru, have remained in the market during this transition. Between them, they have as much capacity as all the newcomers while LanPeru has already absorbed most of the traffic that AeroContinente lost.
Unless the newcomers can stimulate a lot more traffic, aspirations such as AeroCondor's to control 30% of the market are heading for a serious reality check.
Source: Airline Business
