JetSMART’s debut in Chile offers a test case for LCC staying power in Latin America

The LCC specialist Indigo Partners has broadened its reach deeper into Latin America with the swift creation of JetSMART, a new ultra low cost airline based in Chile. JetSMART is one of many new low cost airlines attempting to capitalise on stimulation opportunities in Latin America as the region settles into an economic recovery. Trips per capita in many Latin American countries remain low compared to those in more mature markets, and Chile offers unique characteristics that Indigo no doubt found attractive, including the country's status as one of the more liberalised markets in the region.

JetSMART is materialising as Latin America's largest aviation conglomerate LATAM Airlines Group is beginning to roll out a new fare structure to compete more effectively with existing and aspiring LCCs. This action is in order to obtain its fair share of passenger growth resulting from stimulatory pricing. LATAM's moves alter the competitive dynamics JetSMART faces in the Chilean market, where LATAM is the dominant operator by a wide margin.

Key to JetSMART's longevity is maintaining a cost structure that enables traffic stimulation in Latin America's challenging environment where high taxes and airport costs are a major feature. The company's backers are more than familiar with fine tuning an ultra low cost operation, but Latin America presents its own unique obstacles for start-up LCCs to overcome.