Grupo Aeroportuario del Sureste (ASUR) estimated Mexican airline traffic would need until the end of 2012 to recover from the failure of local carriers, including Avolar, ALMA de Mexico and Mexicana de Aviacion (informador.com.mx, 24-Jun-2011). The airport operator estimated that airline failures have cut traffic in Mexico by almost 10 million passengers and cut more than 100 aircraft out of service and as many as 20 million seats. Aeromexico, Interjet, Volaris and other carriers have increased capacity to compensate, but have been unable to make up the majority of the difference.
ASUR: Airline failures have taken 20 million seats out of Mexican market
You may also be interested in the following articles...
LATAM Airlines Group faces bigger challenges outside Brazil, as competitors in Peru and Chile attack
During the sharp economic downturn that has engulfed Brazil for more than a year the LATAM Airlines Group has benefitted from less challenging conditions in the domestic markets of its Spanish speaking countries – Argentina, Chile, Colombia, Ecuador and Peru. But during 2Q2016 weakening economies and currency pressure in some of those markets, along with growth by LATAM’s competitors, created challenges for the company in those countries, particularly the Peruvian and Chilean domestic markets.
Some of the competitive pressure in Peru’s domestic market should ease in 2H2016, which should benefit LATAM for the remainder of the year. The company is making a significant international push from its hub in Lima in 2016 and early 2017 with the introduction of eight new markets, six of which are regional routes within South America. LATAM’s expansion from Lima should allow the company to leverage North-South traffic flows for connections through what is its third largest hub measured by seat deployment. Despite bleak economic conditions in many Latin American countries, LATAM continues to leverage its diversified network to grow in markets where it faces few, if any, competitors.
The weakness in Brazil’s domestic and international markets remains status quo. However, conditions in the country’s domestic environment do not appear to be deteriorating as rapidly, which is a welcome sign for LATAM because Brazil still represented 28% of the company’s system capacity in 2Q2016.
Latin American airlines work to attract investors. Ownership laws a hindrance in tough economics
Economic and political upheaval in Brazil during the past couple of years has essentially isolated many of the country’s companies, including airlines, from credit markets. Some of the country’s legislators made a bold move earlier in 2016 to lift all foreign ownership restrictions on airlines; but that specific element of legislation was vetoed by the country’s interim government in order ensure other pieces of a larger bill were ratified.
The push for 100% foreign ownership still appears to have some momentum in Brazil’s uncertain political climate. The country’s transportation minister has reportedly stated that the debate over foreign ownership is not over, and he aims to push for re-opening the discussion about ownership caps in the country’s Senate.
In the meantime, Brazil’s 20% foreign ownership cap remains at status quo in a fast-changing Latin American aviation landscape where Avianca is courting foreign investors and Qatar has just tabled its plans to take a 10% share in LATAM. It would be an unprecedented move for Brazil to allow for 100% foreign ownership of its airlines but raising the cap to 49% seems reasonable, and could possibly help Brazil’s largest airline Gol as it works to restructure billions in debt. But changes in ownership laws may not result in investors flocking to Gol when other Latin American airlines offer less risk to investors.