Almost every week, it appears, a US airline announces a new service to Latin America. Almost every month, it seems, a new codeshare agreement is forged between carriers in North and South America. Every year, it is evident, traffic between the two regions continues to grow. Increasing trade is the backbone of that growth, but continued political stability in Latin America is encouraging tourism.
Encouraging the growth is an aggressive US effort to conclude open skies agreements with countries in the region, allowing more airlines into the market and facilitating codeshare agreements. Discouraging the growth are continued concerns over the safety oversight provided by some of the region's aviation authorities.
The US carriers with the biggest share of North-South traffic are American Airlines, with over 30% of the passengers carried in the year ending 31 March, 1997, followed by Continental Airlines (7.5%), United Airlines (5%) and Delta Air Lines (4%). The leading Latin American carriers are Mexicana (6%), Aeromexico (4%) and Varig (2%). US-Latin American traffic has grown by almost 24% over the past five years, outpacing economic growth, and over that time US carriers have boosted their share of the market to over 58%. Traffic growth is expected to average 10% annually. While American is moving to consolidate its lead by forging alliances with Latin American carriers, the others are far from standing still. Codeshare agreements are the favoured vehicle. American has alliance agreements with Mexico's AeroCalifornia, Central America's TACA Group, Venezuela's AVIANCA, LanChile and TAM of Brazil, and has agreed to take an equity stake in Aerolineas Argentinas. Much of the airline's Latin American traffic is funnelled through its Miami hub, by far the leading US gateway to the region.
The other US carriers are also relying on codesharing to increase traffic, but are also taking advantage of open skies agreements to develop additional US gateways. Continental is adding services to the region from its Houston, Texas, and Newark, New York, hubs, and the airline is strongly tipped to acquire a stake in Aeroperu. United is a founding member of the mighty Star Alliance, which includes Brazil's Varig.
Delta, meanwhile, has launched belatedly an aggressive effort to establish its Atlanta, Georgia, hub as a Latin American gateway, arguing that Miami is overcrowded and hard-pressed to handle the expected growth.
These developments take place against the background of US efforts to conclude open skies agreements with Latin American countries. Deals have been struck so far with six Central American countries and Chile. Talks are under way with Argentina and Peru. Under the Central American agreement signed last May, the USA is providing assistance to improve the safety oversight in certain of the countries covered by the open skies deal. The US Federal Aviation Administration's International Aviation Safety Assessment programme has created a major image problem for Latin America, with the civil aviation authorities of no fewer than six countries rated as not complying with International Civil Aviation Organisation (ICAO) safety oversight standards (Category 3), and five given a conditional rating (Cat 2). Technical assistance is now being provided to help these countries meet the international standards and the effort is expected to improve the region's overall safety levels.
Latin American governments have pursued an aggressive policy of privatisation over recent years and almost all of the region's carriers are now in private hands. The same process is now under way with airports in several countries. Most recently, operation of 33 Argentine airports was handed over to a consortium of local, US and Italian companies which has undertaken to invest $2.2 billion in improvements over the 30-year life of the concession.
Privatisation, coupled with economic policies which have brought inflation under control in most Latin American countries, has improved access to foreign investment. This is already being seen in increased availability of competitive financing for new aircraft purchases - the lack of which has long held back replacement of the region's fleet, largely made up of older, noisier and less efficient aircraft.
Major investment is likely to be required over the coming years to renovate the region's airspace management infrastructure to handle increasing traffic and to take advantage of the benefits of satellite-based communication and navigation technologies. ICAO plans a major conference in Rio de Janeiro in May devoted to implementation of the future air navigation system, and several trials have been conducted already in the region.
Source: Flight International
