‘Lowcostization’ in South America: A Glimpse at What This Year Has Brought

2018 has been a transformative year for aviation in South America; with the emergence and development of new travel options that mark a milestone for aviation in the region and a new chapter; offering more and cheaper travel options as well as increased connectivity across countries. 

In an attempt to detail some of the most important developments, AirlineGeeks has summarised low-cost additions in the countries that have experienced the greatest transformations in their domestic industries.

Argentina  

Argentina has been clearly the star of the show, as economic deregulation policies incited by President Mauricio Macri, begin to take shape in the airline industry. January saw the take-off of new low-cost carrier Flybondi, which resembles and markets what the National government has been referring to as the “airplane revolution.”

The new venture, promising to change the color of Argentina’s skies was no short of complications thanks to its poor-dispatch reliability as a consequence of its predominantly rushed and to an extent improvised growth and operational strategy in an industry that by default should leave little or no room for error.

However, there is no doubt the airline incited change in what was a longstanding rigid industry. For starters, it began flying in the newly habilitated airport of El Palomar (EPA) in the West of Buenos Aires, aimed for low-cost carriers and a project they had been lobbying national authorities to take forward at a fast pace.

In addition, the yellow low-cost carrier began decentralizing what can be characterized as a very centralized market, launching routes such as Cordoba to Bariloche or Iguazu to Mendoza, connecting demanded routes in internal provinces, without the need to connect in the capital of Buenos Aires. In addition, the new carrier placed significant emphasis on targeting a wider consumer base and encouraged more people to fly; taking away the conceived formalities of the industry and talking to consumers in a clear and direct fashion. 

In August the National government removed the price floor in place for all domestic flights, catalyzing a new age of competition where airlines are aggressively competing to capture the increasing mass of price-sensitive low fare flyers, with tickets offered for as low as U.S. $13 one-way.

The long-term viability of fierce pricing competition remains to be seen as inflation and the devaluation of the peso versus the U.S. dollar creates a challenge for airlines having operational costs in U.S. dollars and a fall in consumer expenditure.

October saw Norwegian’s Argentinean branch taking off, beginning flights from Aeroparque in Buenos Aires to Cordoba and Mendoza. With the backing of Norwegian’s expertise, its development, launch and operations have been more cautious than Flybondi’s, gaining reliability amongst the public and changing the perception of low-cost travel in the country; a reputation halted by the recurrent deviations in Flybondi’s operations.

Norwegian Argentina now has a fleet of three Boeing 737-800s and has added flights to Salta, Neuquen, Iguazu and Bariloche.

Finally, Indigo Partners JetSmart has also launched a subsidiary in the country, expecting to take off some time next year. The first aircraft designated for their Argentinean operation arrived in Cordoba earlier this week, with operations set to begin in early 2019. 

In addition, the Chilean mainline will soon begin flying from Santiago to Cordoba, Mendoza and Buenos Aires – El Palomar, before the end of the year after slight delays due to A320 delivery delays. The airline will also begin flying between La Serena in the North of Chile and Cordoba, slowly bringing point to point connectivity into the region.

Chile

Across the Andes, although low-cost competition is at a more mature stage. SKY was the first to join the game in 2015, following the death of its founder Jurgen Paulmann who had a more conservative business approach. Following a swift change in strategy, the company gradually began offering passengers cheaper travel opportunities, customizable to flyers needs.

2017 saw the launch of a new corporate image using brighter colors that aimed to break away from traditional conceptions of air travel and reflect its new sense of direction. The Chilean carrier also received its first A320neo aircraft this year out of an order of 21, marking the first order of new factory fresh aircraft placed by SKY.  

The same year saw the launch of Indigo Partners JetSmart bringing an ultra-low-cost flying concept into the country, operating a fleet of fully optimized 186 seater A320s. The company transported 1,200 000 passengers during their first year of operations flying to 13 destinations in Chile and one abroad. Setting operational efficiency aside, this success is also attributed to the carrier’s bright commercial strategy, focusing on stimulating demand by offering recurrent promotions, offering no-thrills flying experiences at prices never seen before.

In addition, the airline moved away from the centralized market structure that characterizes the region, offering 10 point-to-point regional routes that do not pass through the country’s capital. This is something that other operators have been skeptical of doing in the past, as the country’s particular geographical and demographic conditions, make Santiago a central transit point between the North and South of the country.

The ultra-low-cost Chilean carrier claims to have revolutionized the country’s airline industry by reducing average ticket prices by 30 percent and offering costumers the chance to fly for cheap in brand new equipment with new efficient aircraft and the operational know-how of an international aviation giant. JetSmart is keen on being a leader on this evolving industry transformation across the region and will receive 76 aircraft out of the whopping 430, ordered by Indigo Partners at last year’s Paris Airshow.  

Finally, this year saw the Chilean Government decreasing boarding taxes, which would allow airlines to boost competition and better connect the country and the region.

Peru

Although not as media-tic as its Southern siblings, Peru has had its fair share of low-fare developments over the last year. 2017 saw the take-off of Viva Air Peru, a subsidiary of Viva Air, part of Irelandia group. Although the country’s lack of airport infrastructure trammeled its growth, the airline has ambitious plans, including the beginning of inter-provincial flights, helping move from hub and spoke to point-to-point.

In addition, Chilean SKY Airline announced its plans to set up a subsidiary in Peru. The airline is in the process of certifying their A320neo with the Peruvian General Aviation Authority (DGAC) and plans to base some of their upcoming A320neos in their hub in Lima.

The airline plans to fly domestic destinations across the country, as well as use the capabilities of the A320neo to reach destinations in the U.S. and the Caribbean and feed passengers through their Lima hub.

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Jose Antonio Payet

As a geography nerd, Jose has always been fascinated by the complexities of the airline industry and its ability to bring the world closer together. Born and raised in Peru, now studying in the UK. he has travelled around America, Europe and South East Asia. His favorite aircraft is the Boeing 767-300, which he has flown many times during his childhood; although now the A350 is slowly growing up on him.

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