PAL Airlines (previously known as Aerolinea Principal Chila SA) was a carrier that operated scheduled domestic services within Chile utilising narrowbody jet and turboprop equipment. PAL Airlines was based in Santiago, Chile. CEO Fernando Musiet confirmed the carrier has indefinitely suspended operations "until we see that it is possible to be profitable". Mr Musiet said the carrier has been affected by unfavourable macroeconomic conditions in Chile, which include a slowdown in mining activity, as well as rising fuel costs. Regulator DGAC suspended the PAL due to unpaid aeronautical charges, while the carrier's debt reportedly exceeds USD10 million. PAL's maintenance centre is the carrier's primary asset and will reportedly continue operating.
Location of PAL Airlines main hub (Santiago International Airport)
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Chile’s domestic passenger market grew by 16% in 1H2013, making it once again one of the fastest growing in Latin America. Chile’s domestic market has now nearly doubled in size since 2009 with annual growth of nearly 20% in 2010 to 2012.
LATAM Airlines Group subsidiary LAN continues to dominate Chile’s domestic market, accounting for 75% of the 4.6 million total domestic passengers in Chile during 1H2013. LAN’s domination of the market is scaring away potential new entrants, including LCC groups such as Viva.
Chile and Russia are now the only top 25 domestic markets in the world that are not served by a single LCC. Russia is expected to see a return of LCC activity within the next year, leaving Chile alone on this undistinguished list.
Chile has recorded 17% passenger growth for the second consecutive year, making it the fastest growing market in Latin America. The rapid growth in Chile is somewhat surprising as it is one of the more mature markets in Latin America and the market is dominated by one player, LAN, which can have a stifling impact on competition. But the small country of 17 million continues to support rapid increases in travel propensity, which is already the highest in Latin America, driven by a strong economy and Chile’s unusual geography.
After recording flat traffic figures for 2009, Chile’s aviation market has grown by 57% over the last three years to 15.2 million passengers, according to Chilean Civil Aeronautics Board data. Growth in 2011 and 2012 was an impressive 17% while 2010 ended with 11% growth despite the impact of a devastating earthquake which struck Santiago in Feb-2010.
LAN and TAM are confident they will be able to complete their merger in 1Q2012 at the latest, believing the concessions they are offering to mitigate competitive concerns on routes between Brazil and Chile are more than sufficient. LAN and TAM are offering slots at congested Sao Paulo Guarulhos airport for any carrier interested in launching service on the Sao Paulo-Santiago route along with capacity and price guarantees.
As Chile’s competition authorities continue to investigate and delay the proposed merger of LAN and TAM, the expansion of Sky Airline in Chile is starting to nibble away at LAN’s commanding share of the market. LAN and TAM combined now control 61% of Chile’s international market, according to February data from Chile’s civil aviation authority, JAC. Chile’s second carrier, Sky, only has a 6% share of the international market but has been expanding rapidly.