VivaColombia

Colombia's aviation market poised for more rapid growth in 2013, led by VivaColombia, Avianca & LAN

Colombia recorded 15% growth in domestic passenger traffic in 2012 and should see more double-digit growth in 2013 driven partially by expansion at low-cost start-up VivaColombia. The Colombian international market also grew by 13% in 2012 and should see more rapid growth in 2013 driven partially by expansion at LAN Colombia.

Colombia’s strong economy and growing middle class population provide favourable market conditions. The rise in Colombia’s LCC penetration rate, which has always been significantly lower than Latin America’s other two major markets, is also stimulating demand as VivaAerobus brings low fares to more domestic routes. But competition in Colombia is intense, making it difficult to achieve profitability in the domestic market.

Avianca-TACA primes for re-branding and intensifying competition with LATAM

Avianca-TACA will come full circle during 2H2013 as its various airlines unify under the Avianca brand more than three years after the Avianca-TACA merger kickstarted consolidation in Latin America and drove the decision by LAN and TAM to form what is now the region’s powerhouse LATAM Airlines Group. During 2013 the competition between the two largest airline groups in Latin American will only intensify in the markets where they already compete fiercely – Colombia, Ecuador and Peru.

With Avianca-TACA completing its merger more than two years ahead of LATAM, Avianca-TACA has the benefit of harvesting a combined network whereas LATAM is just beginning to ferret out the benefits of its newly combined network resources.

In addition to continued competitive pressure from LATAM during 2013 Avianca-TACA will also encounter some new competition on international flights from Ecuador and some pressure from startup VivaColombia in its largest market Colombia. At the same time Avianca-TACA continues to battle infrastructure constraints at its largest hub Bogota, which could result in further expansion at its Lima and San Salvador hubs.

VivaAerobus and VivaColombia focus on domestic expansion as Irelandia ponders third Viva franchise

VivaAerobus and VivaColombia are planning further expansion in the Mexican and Colombian domestic markets in 2013 while they remain separate entities without any network or operating synergies. But the two low-cost carriers could start exploring a closer partnership in 2014 as VivaAerobus looks to potentially join VivaColombia as an A320 operator and launch services to other Latin American countries.

Meanwhile, Irish investment firm Irelandia Aviation, which owns stakes in VivaAerobus and VivaColombia, continues to study establishing a third Viva affiliate in a new Latin American market. With the Viva brand already established in Colombia and Mexico, and as the Brazilian market is currently over-saturated, smaller Latin American markets that lack any local LCCs are being studied. The Viva group could ultimately consist of several LCCs, with most of the carriers being small in size but enjoying economies of scale by being part of a pan-Latin American group.

VivaColombia shows minimal market disruption as Colombian traffic posts solid growth

Upstart VivaColombia appears to be creating little disruption in Colombia’s domestic market after the low-cost carrier modelled after sister Mexican carrier VivaAerobus made its debut in May-2012. After just a month of operations it built up a roughly 3% market share while its two main rivals Avianca and LAN Colombia increased their share. Meanwhile, Copa Colombia continues to cede domestic market share as it continues a focus on redeploying domestic capacity to international markets.

But early data do not constitute a trend, and with less than a few months in operation VivaColombia has lots to prove in order to declare that a low-cost model is viable in Colombia. The carrier already is making some network tweaks, and VivaColombia needs to successfully execute its strategy of focusing on thinner, largely leisure-oriented routes before it can conclude it has a permanent place in the Colombian market.

VivaColombia takes off in hotly contested, fast-growing Colombian market

VivaColombia made its official debut as Colombia’s lone low-cost carrier on 25-May-2012, ushering in what it hopes to be new era in air travel in the booming Colombian market, which recorded in 1Q2012 a 12% hike in domestic passengers traffic to 3.8 million. While the carrier’s stated goal is to shy away from highly competitive Colombian trunk routes, markets in VivaColombia’s initial roll-out include some of Colombia’s busiest routes that are dominated by the country’s largest carrier Avianca and LAN Colombia, which is expanding capacity after taking time in 2011 to restructure the former unprofitable operations of Aires.

The LAN-initiated restructuring included dropping Aires' LCC model, which was introduced in early 2009 when the carrier gave Colombia its first taste of low fares, stimulating demand as domestic passenger traffic grew in Colombia by 13% in 2009 and a staggering 30% in 2010. The growth slowed in 2011 to only 5% to 14.6 million passengers as Aires significantly cut capacity. But for 2012 the growth in Colombia's dynamic domestic market is expected to return to double digits, driven partially by VivaColombia's launch.

VivaColombia prepares for 2Q2012 launch as Irelandia ponders pan-Latin American LCC network

Low-cost carrier start-up VivaColombia has adjusted its business plan ahead of its planned May-2012 launch and will focus primarily on stimulating demand on thin domestic routes. VivaColombia has selected Medellin as its base and is in the process of leasing an initial fleet of five A320s, having decided against pursuing fleet synergies with Mexican sister carrier and B737 operator VivaAerobus.

The Colombian carrier, which was provisionally known as La Nueva Aerolinea (LNA) until early this year when investment from VivaAerobus owners Irelandia and IAMSA was secured, had an initial business plan that envisioned sticking to trunk routes from a Bogota base. LNA was initially established over two years ago by four Colombian entrepreneurs, led by former Avianca CEO Juan Emilio Posada. It was initially awarded traffic rights last year for six domestic trunk routes. The cross-ownership in Mexican and Colombian carriers could be the early stages of a Viva-branded pan-Latin American LCC.