Sky Airline is a Chilean full-service airline, with bases in Santiago and Antofagasta. The airline is the second-largest carrier in the Chilean market, behind LAN. Sky Airline operates an extensive network of domestic services and short-haul international services.
Location of Sky Airline main hub (Santiago International Airport)
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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.
The spotlight in Latin America this year will primarily be shone on LAN and TAM as the two airline groups complete their landmark merger and begin the integration process. But it is also a key year for Avianca-TACA, which completed their merger in early 2010 and has completed about 90% of its integration process.
The integration of Avianca and TACA will be wrapped up this year as the carrier formally joins the Star Alliance, completing two major milestones for the fast-expanding airline group. Several major decisions also loom for the group in 2012 related to its corporate structure, branding and fleet.
Structurally, a decision will likely be made by the end of this year on whether to bring Avianca Brazil into the publicly traded holding company Avianca-TACA. The Brazilian carrier is still owned by the Synergy Group, the holding company controlled by the Efromovich family which also owned Avianca prior to its merger with TACA (the Efromovich family now has a majority share in Avianca-TACA Holding). As a result, Avianca Brazil remains separate although it has a co-branding arrangement with Colombia-based Avianca.
The rivalry in Latin America between leading airline groups LATAM and Avianca-TACA has increased another notch following the establishment of a new alliance between Avianca-TACA and Chilean carrier Sky Airline. While relatively small, the tie-up forged this week between leading Colombian carrier Avianca and Sky could be a precursor to further consolidation in the region. Such consolidation will almost certainly follow alliance lines as LATAM, which will be formally established in late 1Q2012 once LAN and TAM complete their merger, is poised to opt for oneworld while Avianca-TACA is now in the process of joining Star Alliance.
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.
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