Future Airport: How do you rate Latin America’s strength in the aviation sector and its likely power in the next few years?
Alexandre De Gunten: Although it’s hard to generalise, the Latin American industry has strengthened in the past few years. People tend to look at Latin America as one place but it’s a compilation of markets. There are well-established large countries, such as Brazil and Mexico, but there are also smaller markets, with factors such as gross domestic product (GDP), airline and tourism growth making an impact on route development. From what I can see, the market is still growing strong. Latin America is forecast to be the fastest growing region behind China. There are high expectations.
FA: What about the present high oil price? How do you think Latin America can handle this?
ADG: The record price of fuel affects everybody but there is more room for air traffic growth here than there is in Europe and the US. Brazil is already the eighth largest domestic market in the world, with Mexico occupying 12th position. Latin America’s growth in the past four years stands at about 13%. We’ve just finished our annual airport capacity study, which is available on our website. This and other traffic information is available in more detail.
It makes a lot of economic sense to invest in the most fuel-efficient technology possible. In the Latin American region, this kind of investment has been happening for some time. It may well accelerate. Some countries continue to work with older aircraft fleets, for example Argentina and Venezuela. The average fleet age in Latin America is 12.8 years old, which is better than the average fleet age in the US. We need to make sure we have efficient operations in terms of flying point-to-point, choosing the right aircraft types for the right markets.
FA: New route development is an expensive and highly involved business, so why are we seeing so much activity in South America? Are there any underlying political reasons?
ADG: First, you cannot experiment with a new route for a few months to test the market and then nonchalantly pull out if it doesn’t work. To open a new route requires significant investment, especially in our region, where many of the new routes will be international links. You need to acquire the necessary permits, and set up your organisation and sales network. It’s difficult to do, but the carriers here have been adding connectivity nonetheless.
They are being aggressive in the secondary markets they have chosen. In South America, the market economies are getting stronger all the time. We’ve had the lowest inflation rate in 40 years and GDP growth has been strong in the past five years. This has increased trade and business links with Latin America. This is why there will be more flights within and to the region in future. For the first time, we’re seeing flights from the Middle East to Latin America.
Historically a lot of our international air traffic originated from or travelled through the US because of business and industry links, but more recently the US has made it a nightmare for South Americans to travel there. Latin Americans have experienced more difficulty in securing visas, and going through customs and immigration. As a result, a lot of the growth is bypassing the US.
FA: You’ve painted a positive picture so far. Are there any obstacles to new route development for the airline industry in Latin America, or to its ability to handle increased volume?
ADG: We’re slightly better positioned than other markets. One of the few concerns for us is the lack of competitiveness in authority charges. We have to become much more efficient on the airport side.
If you look at the airport charges enforced by airports in Latin America, compared with those in other parts of the world and the cost of the region, you will see that we’re not yet competitive. This makes travel more expensive and hurts the growth of the industry.