TACA continues expansion in Peru with A330s ahead of rebranding as Avianca


TACA Peru is planning further expansion with the introduction of widebody aircraft, two A330s, which will be used initially to increase capacity to Buenos Aires, Bogota and Miami. The upcoming expansion at the Avianca-TACA subsidiary follows rapid growth by the Peruvian carrier over the last two years in both the domestic and international markets. TACA Peru earlier this year became the second largest carrier in the country's fast-growing domestic market, a position it has had for several years in Peru's international market.

The new fleet of Lima-based A330s should help Avianca-TACA close the gap with rival LATAM, which is by far the largest airline group in Peru and the broader South American market. Avianca-TACA has been focusing on expanding its Lima hub, which is well positioned as a north-south hub for the fast-growing intra-Latin American market, as congestion at its main hub at Bogota increases. TACA Peru is one of several TACA carriers being rebranded Avianca in 1H2013 as Avianca-TACA finally moves to a single brand three years after it completed its merger.

  • TACA Peru is planning to expand its operations with the introduction of widebody aircraft, two A330s, which will be used initially to increase capacity to Buenos Aires, Bogota and Miami.
  • The new fleet of A330s will help Avianca-TACA close the gap with rival LATAM, which is the largest airline group in Peru and the broader South American market.
  • TACA Peru is one of several TACA carriers being rebranded Avianca in 1H2013 as Avianca-TACA moves to a single brand three years after its merger.
  • The A330s will allow TACA Peru to up-gauge high demand routes, particularly in markets such as Buenos Aires where the carrier is unable to add frequencies due to bilateral limitations.
  • The A330s will also be used to add capacity on the Lima-Miami route, allowing Avianca-TACA to close the gap with competitors.
  • Avianca-TACA is considering long-haul expansion to Europe after the delivery of its first Boeing 787 in 2014.

TACA to begin A330 operations on 15-Dec-2012

Avianca-TACA CEO Fabio Villegas told CAPA at the Nov-2012 ALTA Airline Leaders Forum in Panama that TACA Peru plans to launch services with its first A330-200 by the end of Dec-2012 on the Lima to Bogota and Buenos Aires routes. He said the aircraft "is already there and it's in the process of being certified" with Peruvian authorities.

TACA has since set a 15-Dec-2012 date for converting one of its two daily Lima-Buenos Aires flights to A330-200s. The carrier has not yet set a launch date for up-gauging one its two daily Lima-Bogota flights to A330s.

A second A330 will be added to TACA Peru's fleet in 2013 and be used to add capacity on the Lima-Miami route. Both A330s will be registered in Peru and be operated by Peruvian crews. TACA Peru now operates a fleet of Embraer E190s and Airbus A320 family aircraft. A320s and A321s are now used for the Bogota, Buenos Aires and Miami routes.

A330 allows Avianca-TACA to add capacity to Argentina despite bilateral restrictions

Mr Villegas says the A330s give TACA Peru an opportunity to up-gauge high demand routes, particularly in markets such as Buenos Aires where the carrier is unable to add frequencies due to bilateral limitations. TACA Peru currently operates two daily flights to Buenos Aires with 194-seat A321s, the largest aircraft it currently operates. "There is a market there for a widebody," Mr Villegas says.

Lima-Buenos Aires is also served by Aerolineas Argentinas and LAN. Aerolineas operates one daily frequency on the route with 737s while LAN operates three daily flights with 767s, according to Innovata data. LAN currently accounts for 56% of capacity on Lima-Buenos Aires compared to 33% for TACA and 11% for Aerolineas. After TACA up-gauges one its two frequencies to A330s on 15-Dec-2012 it will see its share of the Lima-Buenos Aires market increase to 39%.

Lima-Buenos Aires capacity by carrier (one-way seats per week)


One-way seats per week



Aerolineas Argentinas


TACA: before 15-Dec-2012


TACA: after 15-Dec-2012


TOTAL: before 15-Dec-2012


TOTAL: after 15-Dec-2012


The impact on the premium Lima-Buenos Aires market is particularly large as Avianca-TACA's A330-200s are configured with 30 long-haul business class seats compared to the 12 short-haul business class seats on the group's A321s. In economy there are only 40 additional seats on Avianca-TACA's A330-200s compared to its A321s. Avianca already uses A330-200s to serve Buenos Aires from its Bogota hub, a route it is now only able to operate four times per week.

Up-gauging Lima-Miami to A330s, which is expected to occur sometime in 2013, similarly will allow Avianca-TACA to close the gap with competitors. TACA Peru now operates one daily A320 flight between Lima and Miami. LAN operates the route with three daily 767 flights and its oneworld partner American Airlines offers two daily flights with 757s and 767s. TACA now only accounts for 12% of seat capacity on the Lima-Miami route, compared to 56% for LAN and 32% for American Airlines

Lima to Miami capacity by carrier (one-way seats per week): 19-Sep-2011 to 2-Jun-2013

"As we develop I think we'll operate [A330s] to the States in the near future from Lima," Mr Villegas said. "We now fly Miami but not with a widebody. There is an opportunity for a widebody there. We'll probably fly Miami with a widebody, adding capacity."

Miami is now the second largest route from Lima after Santiago based on capacity, with over 16,000 weekly seats. Buenos Aires is the third largest route from Lima but will become the second largest, overtaking Miami, after TACA begins deploying A330s on the route. Bogota is now the fourth largest route from Lima, according to Innovata data.

Lima-Bogota route allows Avianca-TACA to move A330s between bases

The Lima-Bogota route is currently served with two daily A320 flights from TACA and two daily flights from sister carrier Avianca, one of which is operated with A320s and the other with A330s. LAN also currently serves the Lima-Bogota route with two daily A319 flights, according to Innovata data.

By up-gauging the TACA Peru-operated flight to A330s, Avianca-TACA is able to boost capacity between its Lima and Bogota hubs and expand its leading position on the route. Avianca and TACA combined already account for a leading 71% share of capacity between Lima and Bogota compared to only 29% for rival LAN.

Lima-Bogota capacity by carrier (one-way seats per week): 19-Sep-2011 to 02-Jun-2013

Deploying the A330 on the Lima-Bogota route also allows Avianca-TACA the ability to maintain the Lima-based A330s in Bogota and interchange the A330s based at its two hubs. The inter-operability of the group's A330 hub particularly becomes feasible next year after TACA Peru takes on the Avianca brand and Avianca's AV code.

Lima marks second widebody base for Avianca-TACA

Avianca-TACA now operates nine A330s from its Bogota hub. The new Lima-based A330 marks the first time the group, which was established in early 2010 following the merger of Avianca and TACA, has put a widebody at any of its other hubs. It also marks the first time any of the TACA carriers have operated widebody aircraft since the late 1990s, when Grupo TACA phased out its fleet of Central America-based 767s. However, the novelty of a TACA-operated A330 will not last long as Avianca-TACA in Oct-2012 announced plans to transition to a single brand during 2013, with the Avianca brand being the selected brand.

In addition to Bogota and Lima, Avianca-TACA has international hubs in San Salvador in El Salvador and San Jose in Costa Rica. Since the merger was completed the group's executives have repeatedly talked up the possibility of adding widebody aircraft in Lima or San Salvador as a potential benefit of the merger but until now have opted to continue adding A330s at Bogota. For example, the group's ninth A330, which was delivered in Sep-2012, was used to add capacity between Colombia and Spain.

The group now uses its Bogota-based A330s to serve its two European destinations, Madrid and Barcelona, as well as some medium-haul flights to South America and the US.

Long-haul expansion for Avianca-TACA possible after 787s are delivered

European expansion for Avianca-TACA may be considered after the group takes delivery of its first Boeing 787 in 2014.

The group in Nov-2012 placed an order for three additional 787s, lifting commitments to the type to 15 aircraft. Mr Villegas says the additional aircraft will be delivered in 2017 and 2018 while the 12 787s from the group's original order will be delivered starting in 2014. He says the first four 787s are now scheduled to be delivered in 2014 but delivery dates of the final eight aircraft from the original 12-aircraft order have not yet been confirmed.

The Avianca-TACA fleet plan envisions the 787s replacing the A330s, which were acquired as an interim solution to replace 767s following delivery delays with the 787s. The group is only committed to acquiring one additional A330, which will be delivered in 2013 and be based in Peru. Mr Villegas says the group still plans to phase out its entire A330 fleet, which will reach 11 aircraft next year, but it has the flexibility to extend leases on some of its A330s should market conditions warrant.

If Avianca-TACA chooses to extend leases on some of its A330s, its initial batch of 787s could be used for growth in Bogota and or Lima. "Probably we'll maintain some A330s," Mr Villegas says. "But it depends on how the market behaves."

Avianca-TACA develops Lima as hub for southern South America

However, European services from Lima seem an unlikely scenario for Avianca-TACA even in the medium to long term.

LAN currently serves the Lima-Madrid route along with its oneworld partner Iberia and SkyTeam carrier Air Europa. (Air France also serves Lima from its Paris hub.) But Avianca-TACA has been positioning Lima primarily as a north-south hub for the intra-Latin America market. The group's Lima hub in this respect competes mainly with Copa's Panama City hub, which is the largest hub for the fast-growing intra-Latin America market.

LAN also has positioned its Lima hub to pursue intra-Latin America flows but unlike Avianca-TACA the group uses Lima as a hub for the US and Spain. Avianca-TACA's San Salvador hub is focused more on the North American market including connections from North America to Latin America and the Caribbean.

While TACA serves only one destination (Miami) in North America from Lima, TACA serves nine destinations in North America from San Salvador: Dallas, Houston, Los Angeles, Miami, New York JFK, Orlando, San Francisco, Toronto and Washington Dulles. From San Jose, TACA also serves Los Angeles, Miami and New York. But San Salvador and San Jose are not linked with any destinations in the southern portion of South America. Avianca-TACA uses Lima and to a lesser extent Bogota to offer connections deeper into South America, including to Argentina, Brazil, Chile, Paraguay and Uruguay.

While Bogota is by far Avianca-TACA's largest base, the group sees opportunities to develop Lima and San Salvador as congestion in Bogota intensifies. For example this year Avianca-TACA has been launching routes from secondary Colombian cities such as Medellin and Cali to both San Salvador and Lima. Traditionally, Avianca has only connected these cities to Bogota although rival Copa, which has a Colombian subsidiary, has been very successful in recent years at linking several secondary cities in Colombia with its Panama City hub.

"What we'd like to do is offer the major destinations in Colombia like Medellin and Cali the opportunities to use the Salvador hub to destinations to the north that we are not flying to from Bogota - such as San Francisco, Los Angeles, Houston and Dallas." Villegas explains. "And in Lima we'd like to offer Medellin and Cali more frequencies like Buenos Aires where we are constrained to grow because of regulatory reasons and offer destinations that we are not serving from Bogota such as Montevideo and Asuncion."

In addition to Asuncion in Paraguay, Buenos Aires in Argentina and Montevideo in Uruguay, other destinations in the southern portion of South America for TACA Peru include La Paz and Santa Cruz in Bolivia; Porto Alegre, Rio de Janeiro and Sao Paulo in Brazil; and Santiago in Chile. Of these nine destinations, only five are also served by Avianca from Bogota - Buenos Aires, Rio de Janeiro, Sao Paulo, Santiago and La Paz.

TACA Peru's intra-Latin American network is very balanced in that it also currently offers 11 international destinations in Latin America and the Caribbean to the north of Lima: Bogota, Cali and Medellin in Colombia; San Jose in Costa Rica; Havana in Cuba; Santo Domingo in the Dominican Republic; San Salvador in El Salvador; Guayaquil and Quito in Ecuador; Mexico City in Mexico; and Caracas in Venezuela. Cali and Medellin were launched in 3Q2012.

Avianca-TACA continues to pursue multi-hub strategy

Avianca-TACA has little choice but to pursue a multi-hub strategy given the congestion at all its hubs. In stark contrast to Panama City, where the airport continues to pursue ambitious expansion that meet the needs of Copa, Bogota is congested and is now struggling to catch up with the growth recorded in recent years in the Colombian and broader Latin American market. The Bogota airport opened a new terminal in Oct-2012 but, frustratingly for Avianca-TACA, the number of gates did not increase. Avianca-TACA has been forced to use remote parking spots at the new terminal, including for its A330s.

See related article: Latin America growth could slow if infrastructure challenges are not addressed

Avianca for now continues to expand in Bogota despite the infrastructure limitations but the connection experience for its passengers is far from ideal. "We will grow [in Bogota] as much as we can as available in terms of availability of slots," Mr Villegas says.

Much smaller San Salvador is also congested although hasn't seen the traffic growth that Bogota has witnessed in recent years. It seems years of lobbying by TACA, which was based in El Salvador prior to merging with Avianca, for an airport expansion project has finally paid off. "Salvador has an issue but I think doesn't have the restrictions we have in Bogota. I think there are going to be good developments in Salvador in the near future," Mr Villegas predicts.

The San Salvador hub is operated by TACA International while the even smaller San Jose hub is operated by LACSA, which is also known as TACA Costa Rica. TACA International (TA code), LACSA (LR code) and TACA Peru (TA code as well) are now all 100% owned by Avianca-TACA Holding and are members of the Star Alliance. Mr Villegas says all three of these carriers will adopt the Avianca brand and Avianca's AV code in 1H2013 (See Background information).

TACA Peru pursues rapid expansion

Of all the TACA-branded carriers, TACA Peru has been growing by far the most rapidly. TACA Peru has been transporting about 170,000 passengers per month in recent months, including about 90,000 international passengers and 80,000 domestic passengers. At the beginning of the year TACA Peru was only transporting about 100,000 passengers per month, according to Peruvian Transport Ministry data.

In Feb-2012 TACA Peru overtook Star Peru as the second largest domestic carrier. In Oct-2012 TACA captured 12% of Peru's domestic market, compared to 10.2% for Star Peru. Peruvian Airlines also overtook Star Peru in Aug-2012 and is now the third largest carrier in the domestic market, capturing a 10.4% share in Oct-2012. LATAM affiliate Lan Peru is still by far the largest domestic carrier in Peru, accounting for 63.2% of passenger traffic in Oct-2012.

Peru domestic market share (% of passengers) by carrier: Oct-2012

Through the first 10 months of 2012, Lan Peru accounted for 62.1% of Peru's domestic market, followed by TACA Peru with 12.5%, Star Peru with 12.1% and Peruvian Airlines with 10.6%. Several small regional carriers accounted for the remaining 3.7%, including a 1.6% share by LC Busre.

Peru domestic market share (% of passengers) by carrier: Jan to Oct-2012

While TACA Peru is still much smaller than Lan Peru domestically, it has come a long way in less than two years. Before introducing E190s into its fleet in early 2011, TACA Peru only operated one domestic route - Lima to Cuzco and accounted for about 2% of Peru's domestic market.

Several domestic destinations were added in 2011 as the carrier placed into service two E190s. Another batch of new domestic routes was launched in early 2012, enabling TACA Peru to surpass Star Peru as the second largest domestic carrier.

See related articles:

TACA Peru CEO Daniel Ratti told CAPA at the ALTA Airline Leaders Forum in Nov-2012 that the focus in 2012 has primarily been on "consolidating the domestic" operation. He says the carrier now serves nine domestic destinations. While there are opportunities to further expand the domestic network because there are cities served by other Peruvian carriers but not yet TACA Peru, the main focus will be on further expanding capacity in existing domestic markets.

TACA Peru plans to add domestic capacity as E190s are replaced by A320s

Mr Ratti says the two E190s now operated by TACA Peru will be returned over the next couple of years to the group's Central American hubs, where the aircraft originally were based and the rest of Avianca-TACA's E190 fleet now operates. A320 family aircraft will be added to replace the E190s, allowing TACA Peru to up-gauge several of its domestic routes. "The domestic market is growing," Mr Ratti explains. "The E190s were nice to open routes but now the market is more mature."

TACA Peru has already up-gauged most of the routes it originally launched in 2011 with E190s. According to Innovata schedule data, A319s/A320s are now being used on some or all frequencies from Lima to Arequipa, Juliaca, Piura, Tarapato and Trujillo. Only on two of the carrier's domestic routes, Lima-Chiclayo and Cuzco-Arequipa, is the smaller E190 being exclusively used.

There are still opportunities for further capacity increases. For example on Lima-Cuzco, TACA Peru currently has six daily frequencies compared to about 16 for Lan Peru. Peruvian Airlines and Star Peru each have four daily flights on Lima-Cuzco, which is the largest domestic route in Peru.

TACA Peru domestic expansion helps drive growth in the overall Peruvian market

Peru in recent years has had one of the fastest growing domestic markets in Latin America and the entire world. Domestic traffic in Peru increased 28% in 2010 and 13% in 2011, reaching 6.2 million passengers in 2011, according to Peruvian Transport Ministry data. For 2012, the domestic market is on pace to surpass seven million passengers.

Through the first 10 months of 2012, domestic traffic in Peru was up another 16% to six million passengers, according to Peruvian Transport Ministry data. In Oct-2012, the last month Peruvian authorities has reported data for, traffic was up 22% to 671,000 passengers. In Oct-2009, back when TACA only operated one domestic route and just prior to the launch of Peruvian Airlines, there were only 381,000 domestic passengers in Peru.

Peru total monthly domestic passenger traffic, Jan-2008 to Oct-2012

Peru domestic traffic by carrier: Jan-2010 to Oct-2012

Unlike their much larger competitors, Peruvian Airlines and Star Peru are predominately domestic carriers. The two independent carriers now compete on most of the country's trunk routes against Star member TACA Peru and oneworld affiliate Lan Peru. Star Peru operates a fleet of BAe 146s, which allows it operate into smaller airfields the other three carriers cannot access, although it also competes on trunk routes. Peruvian operates ageing 737-200s.

Peru's international market has also been expanding although generally not as fast, growing 5% in 2010 and 14% in 2011 to 5.8 million passengers. Through the first 10 months of 2012, Peru's international market grew 17% to 5.6 million passengers. In Oct-2012, the international market grew 22%, matching the growth in the domestic market, to 600,000 passengers.

Peru total monthly international passenger traffic, Jan-2008 to Oct-2012

Lan Peru, TACA Peru and their sister carriers now account for nearly 70% of Peru's international market. Lan Peru parent LATAM accounted for 46.2% of international passengers in Peru in Oct-2012 and 47.6% of international passengers through the first 10 months of 2012. TACA Peru parent Avianca-TACA accounted for 21% of international passengers in Oct-2012 and 19.2% through the first 10 months of 2012, respectively.

Peru international market share (% of passengers) by airline group: Oct-2012

Peru international market share (% of passengers) by airline group: Jan-2012 to Oct-2012

LATAM and Avianca-TACA both use Lima as an intra-Latin America hub. LATAM is significantly larger in the Lima market because it generally offers more capacity on overlapping routes and also uses Lima as the main hub in Latin America for LAN-branded US services. (Most of LAN's services between the US and its home market of Chile stop in Lima).

In addition to Miami, LAN now serves Miami from New York JFK, Los Angeles and San Francisco. LAN has been focusing widebody capacity growth this year on the Lima-US market, citing a strong demand compared to Europe. During 4Q2012 capacity was added on all four of LAN's Lima-US routes. Lima-Los Angeles will also be LAN's first US route to receive the 787s, with service being introduced at the beginning of Jan-2013.

LAN now accounts for about 60% of seat capacity between Peru and the US, compared to only 6% for TACA. Four US carriers - American, Delta, United and Spirit - account for the remaining 34%.

Between Aug-2012 and Apr-2013, LAN expects to nearly double capacity between Lima and the US from about 6,800 to 12,500 one-way weekly seats. While TACA has just one daily frequency to the US from Lima that provides about 1,000 weekly seats, LAN currently has about eight daily frequencies to the US from Lima which provides over 11,000 weekly seats.

Peru-US capacity by carrier (one-way seats per week): 19-Sep-2011 to 02-Jun-2013

Avianca-TACA is unlikely to catch up with LATAM in Peru

TACA Peru is unlikely to match LAN's Peru-US network as Avianca-TACA is focused more on serving the US from its Bogota, San Salvador and San Jose hubs. LATAM has a different perspective as the group does not have a hub in Central America.

Lan Peru has been Peru's largest international carrier since 2004. Lan Peru and TACA Peru were both established in 1999 but TACA was quicker to expand in the initial years. The Avianca and TACA merger gave new life to TACA Peru as the carrier has resumed rapid expansion since the merger was completed in 2010, ending a hiatus of several years in which TACA Peru pursued limited to no growth while rival Lan Peru grew rapidly. (Following the merger Mr Ratti traded in his 51% stake in TACA Peru for a small stake in Avianca-TACA Holding, resulting in TACA Peru become a wholly owned subsidiary of Avianca-TACA.)

With only one US destination (Miami) and small widebody operation, Avianca-TACA is unlikely to threaten LATAM's leading position in the Peruvian market. But there are plenty of opportunities in Peru for both groups to continue expanding and co-exist.

The Peruvian government, which does not have stakes in any of the Peru's carriers, has also discussed launching a new airline. But the market seems adequately served and if anything could probably benefit from consolidation in the domestic market. The government would be better off using the funds to subsidise domestic routes it believes are essential for the economic development of the country but are not currently viable.

The Peruvian government also needs to invest in airport infrastructure, particularly at Lima. Mr Ratti says Lima's new terminal, which opened in 2009, is already at capacity. The airport is heavily congested during the Lan Peru and TACA Peru banks, forcing the carriers to park aircraft remotely.

Lima is expected to surpass 13 million passengers in 2012,compared to less than nine million in 2009. "The planners never envisioned this kind of growth," Mr Ratti says. "We are pressing the authorities to expand."

The rapid growth seen in Peru in recent years should continue unabated as long as Lima's airport is expanded. Peru's aviation industry has a bright outlook. Lima is strategically positioned in the middle of South America, making it an ideal hub for intra-Latin America traffic. The country's strong economy and growing tourism industry are also driving increases in local demand. It is hardly surprising that Latin America's two largest airline groups are both rapidly expanding their Lima hubs and are bullish on the Peruvian market.

Background information

In addition to its subsidiaries in Colombia, Peru, El Salvador and Cost Rica, Avianca-TACA has a subsidiary in Ecuador, AeroGal, and a sister carrier in Brazil, Avianca Brazil. AeroGal primarily operates domestically while Avianca Brazil is exclusively a domestic operator.

Mr Villegas expects AeroGal will adopt the Avianca brand and code in 2H2013, a few months after the TACA carriers in Costa Rica, El Salvador and Peru are re-branded. He explains Aerogal first needs to transition to a new IT system, which is also required for the carrier to join Avianca, TACA International, TACA Peru and LACSA in Star Alliance. The four carriers formally joined Star in Jun-2012 after completing a major IT upgrade, including transitioning to a new reservation system from Amadeus. But AeroGal, Avianca Brazil and TACA Regional for now remain un-aligned.

See related article: Avianca-TACA and Copa put Star on top in Latin America but the victory will be short-lived

"At AeroGal we plan to go to single code but it will take some time - probably until the second half of next year," Mr Villegas explains. "AeroGal came to the project a little bit later. We need to do a lot of IT, incorporate them into Amadeus, which is our reservation system."

Mr Villegas says the ATR fleet operated under the TACA Regional brand will also be moved to the Avianca brand in 2013. The current TACA Regional operation includes ATR 42s as well as several small turboprops with 19 seats and less. It is expected that Avianca-TACA will divest its stakes in the small Central American regional carriers which operate the small turboprops while the ATRs are moved to the main company. "We are changing the way we operate the regionals. The ATRs will come into the operation of the major company," Mr Villegas says.

TACA Regional currently only operates within Central America. Avianca also has 10 turboprops in its mainline fleet, Fokker 50s which are used on routes within Colombia. But Avianca-TACA announced on 12-Dec-2012 an order for 15 ATR 72s, which will be used to replace the 10 Avianca-operated Fokker 50s as well as the ATR 42s now operated under the TACA Regional brand. As part of the new order with ATR, Avianca-TACA also took options for an additional 15 ATR 72-600s. The firm aircraft will be delivered starting in Jun-2013.

Avianca Brazil, formerly known as OceanAir, already adopted the Avianca brand in early 2010. But Avianca Brazil is not part of Avianca-TACA Holding and is instead wholly owned by the Synergy Group, an investment firm which owns a majority stake in Avianca-TACA Holdling and is now attempting to acquire TAP Portugal. Mr Villegas says at least for now Avianca Brazil will not be integrated into Avianca-TACA or take on the Avianca code. Avianca Brazil will continue to operate under its own O6 code while all of its sister carriers move to the AV code.

See related article: Avianca Brazil to slow down expansion in 2013; to benefit from TAP acquisition and Star membership

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