Ultra Air shows promising early results as dynamics change in Colombia’s market
But the Colombian market continues to rebound at a steady pace, and Ultra Air expects that market expansion will continue.
There are also other significant changes occurring in the Colombian market as the country’s first and third largest airlines, Avianca and Viva, along with the Brazilian operator GOL, are working to create the Abra Group.
Ultra Air’s CEO William Shaw believes that consolidation could open up some opportunities, but also cautions that a level playing field needs to be maintained as the latest round of consolidation progresses.
- Ultra Air launches as demand in Colombia remains robust.
- Similarly to other operators, Ultra Air faces higher fuel costs and currency fluctuation.
- Ultra Air believes consolidation in Latin America should preserve competition.
- The airline plans to roughly double its fleet in 2023 and add eight aircraft annually to its operations during the next three years.
During a recent interview with CAPA TV during the CAPA Latin America Aviation and LCCs Summit in Salvador, Brazil, Mr William Shaw (Ultra Air CEO) explained that “our original fleet plan was to grow a lot faster in the early onset of the airline”, but that the company had made the decision to “stay with six aircraft this year.”
The airline plans to roughly double its fleet in 2023 and add eight aircraft annually to its operations during the next three years, Mr Shaw said.
Once Ultra Air’s fleet has grown to 40 aircraft, Mr Shaw explained that “at that point, we’ll either IPO [undertake an initial public offering] or look for a strategic partner”.
During the interview in late Aug-2022 Mr Shaw explained that during that time Ultra Air had transported more than 650,000 passengers and had posted a 92% load factor.
“We are extremely exhilarated with the reception the Colombian people have had with our airline”, Mr Shaw said.
Colombia’s air travel market has rebounded faster than most others worldwide.
For example, Colombia’s civil aviation agency Aerocivil reported in Dec-2021 that four million passengers had travelled that month by air, which was “106% in relation to the same month of 2019”.
See related CAPA report: Colombian airlines embark on 2022 with ambitions running high
Colombia: weekly domestic ASKs from 2019 to mid-Mar-2023 (projected)
During a longer discussion during the summit, Mr Shaw said Ultra Air had calculated that the Colombian air passenger market would grow approximately 6% per year – which was the country’s growth rate leading up to 2019.
Ultra Air takes the long view as short term pressure on fuel costs remains
Colombia’s airlines face the same challenges that other operators are encountering as a certain level of global economic uncertainty looms large.
Mr Shaw explained that “most of the Latin American markets are going through devaluation and…fuel prices have trebled in a very, very short period of time”. But he said that individuals involved in the airline business were eternal optimists.
“Right now we’re going through higher oil prices, but in the long run, people will get to know your brand”, said Mr Shaw.
He was one of the founders of the Colombian low cost carrier Viva back in 2012: “We sold it [Viva] in 2017, and in 2022 it was sold yet again, but it’s a family name. Now everybody knows the Viva brand in Colombia.”
The new ULCC has a split view on forthcoming consolidation
It has been an eventful 2022 for Viva.
See related CAPA report: Avianca continues to shake up Latin America's aviation scene with creation of ‘Abra'
The creation of the new airline grouping will result in Colombia’s first and third largest airlines becoming a part of the company.
Viva had a share of 24.5%.
Colombia: domestic ASKs by airline, as of early Oct-2022
“I understand where consolidation comes from. I understand the need for consolidation, I’ve seen it happen in other markets”, said Mr Shaw.
He explained that if there is a “fair playing ground” in terms of slots and aircraft parking availability at different airports, “then I’m all for consolidation”.
However, if consolidation results in blocking out the entry of new operators, “...then it goes against the general interests of the public, and I’m not for that”, Mr Shaw explained.
Santa Marta and San Andres airports also do not have taxiways, “...and you’re starting to get into a position where there are certain times of the day where there is nowhere to park an aircraft”, he stated.
“…if that’s what consolation is going to mean, it’s going to be a deterrent to the general population of Colombia”, Mr Shaw warned.
Yet at the same time, consolidation could create opportunities for airlines such as Ultra Air.
“They can’t keep all the routes and all the aircraft flying…they’re going to try and increase yields by decreasing the amount of seats they offer”, Mr Shaw said.
“That’s where we come in with a lower cost per seat kilometre…it’s all about the lower CASK”, he added.
Ultra remains nimble as dynamics shift in the Colombian market
As it works to maintain a cost advantage, Ultra Air also appears to exhibit a certain nimbleness that is unique to a start-up airline, and that adaptability shows no signs of fading.