Colombia

JetBlue Airways continues to exploit Fort Lauderdale with new flights to Lima

JetBlue plans to introduce its first destination south of the equator in Nov-2013 with new daily service from Fort Lauderdale in South Florida to Lima in Peru. The move is consistent with the carrier’s plan to use Fort Lauderdale as a springboard into Latin America as JetBlue indicates more international service from the airport is in the pipeline.

JetBlue is also seizing a prime opportunity to introduce low-cost competition in market where the only LCC presence is a single weekly flight operated by Spirit Airlines. Other carriers operating in the South Florida-Lima market are oneworld partners American Airlines and LAN and Star Alliance member TACA Peru.

Services JetBlue has launched from Fort Lauderdale to Latin America appear to have a short maturation time, which results in the carrier looking to harvest more of those opportunities to balance out new market introductions that take longer to mature. JetBlue has identified about 20 potential new markets in Central America, South America and the Caribbean that are viable from Fort Lauderdale.

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.

Pressure mounts on Star and SkyTeam to secure Brazilian members as TAM confirms switch to oneworld

LATAM Airlines Group announced on 07-Mar-2013 that its TAM, TAM Paraguay and LAN Colombia subsidiaries would join its sister carriers in oneworld, confirming moves which had been considered a foregone conclusion for 18 months. The Star Alliance now faces the risk of not having a member in Brazil, one of the world’s most important growth markets, after TAM shifts from Star to oneworld in 2Q2014. But the void will not last long as Brazil’s fourth largest carrier, Avianca Brazil, will almost certainly join its sister carriers in Star, potentially by the end of 2014.

Meanwhile, Brazil’s second largest carrier Gol continues to be wooed by SkyTeam. With TAM moving to oneworld and Avianca Brazil expected to join Star, the stakes mount for SkyTeam while the benefit of maintaining independence for Gol diminishes.

JetBlue sees an opportunity to mine Fort Lauderdale as Spirit turns its attention elsewhere

JetBlue Airways believes more opportunities exist to expand into Latin America from its southern Florida stronghold of Fort Lauderdale so it can capitalise on the short ramp-up to profitability afforded by those routes. Shifting market dynamics make the opportunity more ripe for JetBlue as Fort Lauderdale’s other major carrier Spirit Airlines has turned its attention to US domestic expansion from the airport.

At the same time JetBlue is not hesitating to increase competition with Spirit, betting that its higher-end product at an only marginally higher fare will entice some travellers away from Spirit’s bare-bones, no-frills service.

Fort Lauderdale was JetBlue’s first destination from its JFK base when it launched scheduled flights 13 years ago. Since that time Fort Lauderdale has played a key role in the carrier’s build-up of North-South passengers along the US eastern corridor. But during the last few years the airport and its geographical location in South Florida have played a particularly strategic role as the carrier worked to aggressively expand into the Caribbean and Latin America.

Ecuador’s TAME pursues international expansion but will face challenges from LAN and Avianca

Ecuador’s largest domestic carrier TAME is pursuing ambitious international expansion which will result in its international network growing from two to nine destinations in less than a year. TAME has added five new international destinations over the last six months, including Sao Paulo on 07-Jan-2013, and is planning to add Buenos Aires and New York by mid-2013. New York will be served with A330s as TAME becomes only the sixth airline group in Latin America to operate widebody aircraft.

The expansion is risky as TAME competes in its home market against Latin America’s largest airline groups – LAN and TAM parent LATAM and Avianca-TACA. The LAN-TAM and Avianca-TACA mergers have made it very difficult for small independent carriers to survive in Latin America, particularly those not following regional carrier models. TAME in recent years has been primarily a regional carrier, operating domestic routes below the radar screens of the big airline groups, but its current expansion puts the government-owned carrier into a much different and more competitive sector.