Air Europa Part 1: Latin America drives growth. Iberia and new entrants provide challenges

Air Europa's 28-Jun-2016 launch of a new daily Madrid-Bogota service returns the spotlight to its Latin American network. This is the airline's most important route region both by capacity and by revenue, and it remains at the heart of its future plans. Air Europa has 13 Latin American destinations - compared with Iberia's 19 - and has been linked with plans for several more.

By seat capacity on Spain-Latin America Air Europa is half as big as Iberia but its share has increased by 10ppts over the past decade, while Iberia's has fallen. Iberia was four times Air Europa's size in this market in 2006. Nevertheless, a re-energised Iberia remains a formidable competitor and there is a small, but growing, band of new entrants.

Air Europa's parent company Globalia is reportedly considering an IPO, having previously been in talks with HNA Group about a possible investment by the Chinese conglomerate. Air Europa is likely to defer plans for the launch of routes to China while it concentrates on Latin America.

Part 2 of this analysis will look at Globalia's financial track record. It will also examine Air Europa's unit revenues, fleet and unit cost positioning.