Chile

Chile emerges as Latin America’s fastest growing market despite domination from LAN

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.

Cathay Pacific explores new growth opportunities as pressure mounts in traditional markets

Cathay Pacific's short-term focus is regional Asia, which it will continue to grow in 2013, although overall the airline expects a slight decrease in capacity as it looks to improve profitability on its long-haul network by replacing maintenance-intensive 747-400s with new 777-300ERs.

But in the long-term the carrier's focus is very much on leveraging its short-haul network to feed long-haul flights, meanwhile re-examining its short-haul strategy.

Cathay is once again evaluating the A380 and 747-8I to see if it needs to grow through capacity increases, stick to its preference for frequency and/or consider new destinations many of its passengers currently reach via connections. The airline is also considering how it might tap into the lucrative Asia-Latin America market. And of course, Cathay must consider what role it will have with alliances.

Yet underpinning these growth possibilities is the fact that Cathay's short-haul market is under pressure, and this will only intensify as Chinese airlines and LCCs continue to gain strength in its home market – an uncomfortable reality Cathay has been shy of admitting.

Peru's market grows rapidly as TACA builds domestic share and LAN continues international push

Air traffic in the Peruvian domestic and international markets continues to grow steadily as overall traffic growth in Latin America remains strong despite weakening economies in Europe. Through the first five months of 2012 Peru recorded 14% growth year-over-year in domestic passengers carried as TACA Peru continued to build up its market share after making a two-phased expansion into the domestic space starting in 2010.

Peru's international market also has been growing rapidly, expanding by 15% through the first five months of 2012. Peru's largest carrier and TACA Peru's main rival, Lan Peru, has been expanding its international operation and is now planning another push from its Lima hub to leverage the combined network of new parent LATAM to capitalise on connecting passengers from North America, which should further bolster Peru’s international market.

New LAN-TAM parent Latam emerges as a leader globally and a powerful force across South America

Latin American airline groups LAN and TAM have finally completed their historic merger, creating a single powerful group which accounts for about one-third of total capacity in the fast-growing South American market. Latam Airlines Group is the market leader in Brazil, which is by far the largest market in Latin America and one of the four BRIC countries, and in three smaller South American countries – Chile, Peru and Paraguay. Latam is also the second largest player in another three South American markets – Argentina, Colombia and Ecuador.

Latam was formally established on 22-Jun-2012, when the LAN and TAM merger transaction was finally completed, ending a drawn out 22 month process that began in Aug-2010 with the signing of an memorandum of understanding between Latin America’s two largest airline groups (by revenue). Trading of Latam shares began on 27-Jun-2012 in New York, Sao Paulo and Santiago as TAM shares were delisted.

Aeromexico continues to build partnerships outside SkyTeam

Aeromexico’s new codeshare agreement with Brazilian carrier TAM represents the second agreement Mexico’s largest carrier has signed with a non-SkyTeam carrier in the last two months. The partnerships reflect the need for both Star and SkyTeam carriers to access key markets in Latin and Central America that are not available through their respective alliance partners.

The Avianca-TACA relationship with Aeromexico, announced in Mar-2012, was surprising given that the Kriete family, which is a main shareholder in Avianca-TACA, is also a major holder in Aeromexico’s competitor Volaris. But Aeromexico has been pursuing a tie-up with Colombia’s largest carrier, Avianca, since it started Mexico City-Bogota flights in 2010. The chance was brushed aside once Avianca-TACA opted to join the Star Alliance, but now the agreement will include more connections than just Bogota as Avianca-TACA cited an ability to partner with Aeromexico on flights to Central and South America during the second half of this year.