Low-cost airlines slow to take off in LatAm

Montevideo / AFP

A cheap flight from Paris to Madrid will set you back about $100.
But it costs six times that to cover the same distance in Latin America, where low-cost airlines are only just taking off. Latin America has long lured travellers with its history, music and natural beauty spanning from Mexico’s deserts to the Amazon rainforest to the glaciers of Patagonia.
But air travel largely remains a privilege for the rich.
French couple Martin Rotig and Helene Le Bras discovered how expensive it is to fly in the region when they began pricing the Latin American leg of their world tour.
The 20-something architects, who put their lives in Paris on hold last July to travel, relied on low-cost airlines to make their way across Asia.
But eye-watering airfares mean they will be stuck taking the bus when they travel South America next year, they said. “We’re going to take the fewest planes possible, because they’re a lot more expensive than in Asia,” said Rotig. He reminisces fondly about fares like the round-trip tickets from Kuala Lumpur, Malaysia to Osaka, Japan they booked for 225 euros ($235) apiece.
A similar flight — seven hours — costs many multiples of that in Latin America.
Frustrated wanderlust
Travel forums and tourist blogs are awash with comments on Latin America’s sky-high airfares, compared to those in Europe, the United States and Asia.
Latin America has few of the secondary airports that low-cost airlines love, and the distances tend to be longer.
The lack of a common market like the European Union also means more burdensome regulations for airlines.
Brazil, Mexico and Colombia are the only countries in the region with established low-cost airlines. They run mostly domestic flights, at higher prices than in Europe.
“The business environment isn’t very favorable” for low-cost airlines in Latin America, said Bertrand Mouly-Aigrot, an air travel specialist at Archery Strategy Consulting in Paris.
“But it’s changing,” he added.
“You’ve got a large population pool, mostly growing economies, a true middle class and a developing tourism sector. There’s no reason the low-cost phenomenon, which is sweeping every other region in the world, will not hit Latin America.”

Upstart start-ups
Several start-ups are poised to change the landscape. A low-cost company called Flybondi is set to launch soon in Argentina with a dozen domestic routes. Its majority shareholder is Julian Cook, founder of Swiss budget airline FlyBaboo.
Another company, Viva — which already offers budget flights in Mexico (VivaAerobus) and Colombia (VivaColombia) — launched a new subsidiary, Viva Air Peru, last month.
One of its shareholders is Irelandia Aviation, the investment firm of Ryanair co-founder Declan Ryan — who has already exported his low-cost model from Ireland to Asia (Tigerair) and the United States (Allegiant).
“Today, one in four airline passengers worldwide takes a low-cost flight. However, Latin America still has exorbitant prices for very short distances. It’s deplorable,” said William Shaw, founder of VivaColombia. His company is eying expansion opportunities in Chile, Argentina, Venezuela and Central America, he said.

Taking to the skies
More than 96 million tourists visited Latin America in 2015, a number set to grow by four to five percent in 2016, according to the World Tourism Organization.
Plane manufacturer Boeing is betting passenger numbers in the region will grow by 5.8 percent in the next two decades, said its president for Latin America, Donna Hrinak.
“The majority of these deliveries are expected to be in the single-class segment, reflecting the continued growth of low-cost carriers,” she said.
In a region where tens of millions of people have escaped poverty since the turn of the millennium, “there’s a lot of potential” for low-cost airlines, said Carlos Ozores of US consultancy ICF.
“In markets where low-cost has developed, like Mexico and Brazil, many customers were taking buses before,” he said.
“Once they start flying, they don’t want to go back.”