Latin America and the Caribbean remain a paradox of opportunities and challenges
Aviation in Latin America and the Caribbean is a study in contrasts.
Opportunities for growth abound, both within the region, and to those countries from longer haul markets. But in some areas, hurdles remain for the air travel sector to reach its full potential.
That's not to say progress isn't being made. Argentina recently introduced new regulations to encourage liberalisation - a welcome change, given historic barriers to entry in the country.
Perhaps Argentina's changes will result in other countries considering more liberal aviation policies; particularly within the Caribbean, where taxation continues to loom large, with few signs of progress.
- The Latin American and Caribbean markets post solid passenger growth.
- Airlines continue to expand their service offerings to, from, and within the regions.
- New policies adopted by Argentina’s government hold great promise.
- Heavy taxation within the Caribbean continues to loom large.
- Countries within the Caribbean should recognise and act on the region’s potential.
Latin America and the Caribbean chart solid passenger growth from Jan-2024 to May-2024
Data from the Latin and Caribbean airline association ALTA show that from Jan-2024 to May-2024 passengers travelling to, from, and within Latin America and the Caribbean grew nearly 8% year-over-year, to 197.2 million.
The intra-Latin and Caribbean market has the highest growth level - nearly 17%, at 22 million passengers. In domestic markets, passenger levels grew by 3%, to 102 million, and extra-regional travel increased by 12%, to approximately 73 million.
Even with pockets of overcapacity between the US and some Latin and Caribbean markets, the US accounted for some of the largest increases on extra-regional services in May-2024. Passenger growth between the US and Costa Rica jumped 26% year-over-year, followed by Panama-US with 22%.
Passenger levels between El Salvador and the US grew 17%.
Airlines continue to bolster their service offerings in those regions
A promising network development is Alaska Airlines' debut of seasonal service to Nassau from both Los Angeles and Seattle in Dec-2024. The company noted the range of its Boeing 737-9s: "...we have planes that offer a greater range for us to fly longer distances, such as Seattle to Nassau."
Next generation narrowbodies could continue to open up opportunities for direct flights from the US West Coast to the Caribbean. Aviation Week Network's ASM consultancy has calculated that approximately 30% of the available seat miles (ASMs) from North American to the Caribbean are deployed on indirect route pairings.
There's also promise for expansion of air service between the Caribbean and South America. Data from CAPA - Centre for Aviation and OAG show that two-way seats between the Caribbean and upper South America in early Aug-2024 jumped approximately 23% year-over-year.
Two-way seats from the Caribbean to upper South America, from Jan-2022 to mid-Aug-2024
Upcoming additions include the restart of LATAM Airlines Peru's service from Lima to Montego Bay, and Sky Airline's plans to bolster frequencies from Lima to Punta Cana in Dec-2024.
Aerolineas Argentinas intends to launch flights from Tucumán and Rosario to Punta Cana in Jan-2025 through Apr-2025. Those flights are one-stop services from Buenos Aires Aeroparque. The airline is also adding flights from Córdoba to Punta Cana in Sep-2024.
More recently, in Jun-2024 Copa upped its frequencies from Panama City Tocumen to Port of Spain, Trinidad and Tobago, and Avianca launched service from Medellín to Aruba, competing with its rival Wingo on the pairing. Wingo, Copa's Colombian low cost subsidiary, also plans to increase frequencies between Bogotá and Punta Cana in Sep-2024.
The start-up low cost carrier Arajet also operates numerous routes to Central and South America from its hub at Santo Domingo Las Américas International airport in the Dominican Republic. The airline is opening a second base at Punta Cana International airport in late 2024.
Other airlines have ramped up intra-Caribbean services.
Sunrise Airways has introduced services from Saint Lucia to Saint Kitts, after launching service from Antigua to Dominica, Saint Kitts and Saint Lucia in May-2024. Winair bolstered frequencies between Sint Maarten and Curaçao in Jul-2024.
The US ULCC Frontier Airlines is building up its presence in San Juan, which is a JetBlue stronghold. Both airlines are upping their presence on routes from the airport within the Caribbean, which could bode well for increased connectivity in the region.
See related CAPA - Centre for Aviation report: Frontier pledges a long term commitment to JetBlue's stronghold in San Juan
Argentina's government makes major strides in liberalising the commercial air transport sector
A recent major development in Latin America was a decree issued by the Argentinian government designed to liberalise the country's aviation sector.
At the time when it issued the new regulations, the government explained that an assessment of the current state of Argentina's air transport system had revealed the country's "aeronautical policy has strongly limited the development of the commercial aviation industry".
Some of the changes in policy include authorising foreign companies to provide internal or international air transportation. The authorities considering those requests "may grant authorisations that include cabotage traffic rights, under conditions of strict reciprocity," the government said.
Additionally: "Companies may freely carry out agreements that involve a consolidation or merger of services and/or businesses, transfer of concessions and/or authorisations in everything related to their non-operational aero-commercial aspects," as long as it is not a practice prohibited by competition law. Authorities would have 15 days to approve or reject those proposals.
IATA Regional VP for the Americas Peter Cerda recently told Aviation Week Network that the decree follows recently signed agreements promoting Open Skies between Argentina and Brazil, Canada, Chile, Ecuador, Peru, and Uruguay.
"I believe we could see more airlines operating both domestically and internationally," Mr Cerda said.
He explained that in 2023 Argentinians had taken 0.61 trips per year, which is below the regional average of 0.65 trips per capita across Latin America and the Caribbean. For comparison, he said average annual trips per capita in the US and Canada were 2.5, and in Spain it was five.
Argentina weekly system seats, 2024YTD versus 2019
In a best-case scenario, IATA estimates that Argentina could reach nearly 60 million passengers by 2032.
"Over the past years, the regulatory framework in the country did not permit the aviation sector to operate in a manner where it could meet existing demand in an economically sustainable way," Mr Cerda stated.
It's a significant development for a country that still has a state-owned airline, Aerolineas Argentinas.
Argentina's President Javier Milei has previously stated a desire to privatise some of the country's firms, including Aerolíneas Argentinas. But so far no clear plan for privatisation has emerged.
Tax challenges continue to plague airlines operating on routes within the Caribbean
Liberalisation in Argentina occurs as airlines operating within the Caribbean still face unreasonable levels of taxation.
InterCaribbean CEO Trevor Sadler recently put the challenges in perspective:
"Taxes, and/or imposed fees, continue to be added rather [than] consideration of any reduction tied to increased volumes of travellers. Many countries are boasting of most travellers ever. But the taxes revenue is not used for airport maintenance purposes, so it simply becomes treasury funds."
"The highest fees applied in one country that we serve is now USD150 (in and out taxes). When connecting that country to the second highest via a third transit country, that country imposes USD80 intransit fees on a round trip, you now have a taxes due bill of nearly USD320."
See related CAPA - Centre for Aviation report: In conversation with Trevor Sadler, CEO, InterCaribbean Airways
It's an ages-old challenge for InterCaribbean and other airlines serving the market.
But some positive developments have occurred. Speaking during the Routes Americas event in Mar-2024, Winair CEO Hans van de Velde described a recent test with its home airport Saint Maarten.
In the test, so-called day fares up and down the island set taxes at USD10 rather than USD67. Within weeks, he said, the airline had "hundreds of bookings", creating extra traffic, he stated.
"We need to be bold to do some experimenting, to show the governments and the airports that volume can compensate the higher prices," Mr de Velde said.
The Caribbean also faces infrastructure challenges, and what could be argued as ineffectual policy decisions. All of those obstacles are well documented, but efforts towards the implementation of long-lasting change have been limited.
Caribbean governments need to help, not hinder, the aviation sector's growth
Perhaps if Argentina's further efforts at liberalisation are successful, other governments will take notice. The elimination of a fare floor years ago led to the creation of two ultra-low cost airlines: JetSMART Argentina and Flybondi.
There is a great deal of unlocked potential for aviation within the Caribbean. But governments need to realise that turning those prospects into reality requires a shift in mindset - something they've yet to recognise.
And as the cost of travelling within the Caribbean mirrors the expense of more far-flung destinations, the region's competitiveness is at risk of diminishing.