The continuing opening up of transborder economies also bodes well for airlines. The Mercosur customs union between Argentina, Brazil, Paraguay and Uruguay came into effect in January. This is likely to spur growth, as are the Andean Pact, Caricom and the Central American Free Trade Area.
The region's airline privatisation process is almost complete. BWIA, Air Jamaica, Pluna and LAB Airlines are the only significant government owned carriers left, and all are expected to be sold early in 1995. However, ownership instability remains, as Iberia may have to sell some or all of its holdings in Aerolineas Argentinas, Viasa and Ladeco.
Following painful restructuring exercises, both Varig and Aerolineas are now trading profitably and should perform well in 1995. But profits are on a knife-edge for many smaller airlines.
The biggest threat remains the US majors which, led by American, are tightening their grip. American has generated over $500 million in operating profits in the region since 1990, while the 12 major Latin American and Caribbean carriers lost $2.5 billion between 1991 and 1993, according to a recent study by Miami consultants AvMan.
In response, the LatinPass frequent flyer programme was launched in January, perhaps heralding more regional cooperation. Further codesharing alliances can be expected. Marketing and yield management need improving, and costs must be cut to narrow the 30 per cent unit cost disadvantage compared with the US majors. It now seems that further consolidation will be inevitable, especially in Chile and Brazil.
Source: Airline Business
