Overview Of LCC Development In Latin America

The LCC sector undoubtedly is confronted with the greatest global expansion opportunity in Latin America as hundreds of millions of people enter the middle class across the region. Huge new travel markets await. Across the region, second tier cities are emerging that offer great promise to LCCs as flag carriers defend their traditional hubs. But how do the region’s fledgling LCCs stay true to their business model of high efficiency? How can they drive the next step change in unit cost (CASK) reduction? Will it be driven by new aircraft technology, better supplier deals, greater operational flexibility or a combination of these? The LCC sector undoubtedly is confronted with the greatest global expansion opportunity in Latin America as hundreds of millions of people enter the middle class across the region. Huge new travel markets await. Across the region, second tier cities are emerging that offer great promise to LCCs as flag carriers defend their traditional hubs.

 

Today, LCCs operate the majority of seats in the two largest domestic air travel markets of Brazil and Mexico and have a growing presence in Chile and Colombia. Yet LCCs also face inherent difficulties in achieving meaningful growth in this region, because of factors such as long distances between large O & D markets (where sector time is often in excess of 3.5 hours), relatively thin markets, high charges and taxes, regulatory inhibition and lack of secondary airports.

 

Given such constraints, how do the region’s fledgling LCCs stay true to their business model of high efficiency? How can they drive the next step change in unit cost (CASK) reduction? Will it be driven by new aircraft technology, better supplier deals, greater operational flexibility or a combination of these?

 

CAPA – Centre for Aviation, Senior Analyst, Lori Ranson