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Opinion: The Future of Aviation in Latin America Will be About Technology, Not Players
Latin America is still an uncharted territory when it comes to commercial aviation. While the region is growing steadily, the general consensus is that there is more space available for new companies and a whole lot of room for new routes, both domestic and international.
However, the distances and demographical distribution of Latin America’s main cities still pose a challenge for the carriers: they are in need of finding a combination of capacity and autonomy that works, both operationally and economically.
Traditional carriers ran their businesses without much hassle, as the competition was slow and many times, ill-fated. A long-term investment in the always unstable Latin American market was a task for the brave or the half-cocked. State opposition, bound to protect the elephantiasis stricken and never-efficient flag carrier, became a well-oiled machine with the permanent objective to doom the private ventures.
A few years back, the tide turned and now carriers compete in almost similar conditions. Low-cost carriers started to emerge and now push for lowering airfares throughout the entire region. Those low-cost ventures come with a bigger back: major holdings are funding the new companies, providing relief during a consolidation period.
This past year will be remembered as a year in which many carriers have established or consolidated their operations. The companies of low-cost titan Indigo Partners, including Volaris and JetSmart, have received the boost of that large order the holding confirmed in late 2017. Just a few days ago, the Argentinian branch of JetSmart received its first brand-new Airbus A320ceo aircraft, the first straight-from-Toulouse in many years to arrive in Latin America. That confirmed a trend that will continue and strengthen in 2019: in a cost-driven market, cost efficiency is becoming king.
Brazilian’s GOL has announced the sale and leaseback of a part of its Boeing 737-800 fleet, accelerating the incorporation of the 105 737 MAX it ordered. The airline will be receiving 11 737 MAX 8s in the second half of the year.
The key factor is clear for GOL’s CEO, Paulo Kakinoff: “We acquired the 737 MAX to make GOL’s operations even more efficient and to offer our passengers additional flights aboard new and even more modern and safe aircraft. The 737 MAX exceeds the expected performance on every count.”
“We’ve been very impressed with the MAX’s superior range, fuel efficiency, and reliability. By accelerating our fleet renewal plan to this new technology, we will be able to further reduce our costs and open up more international destinations for our customers,” he added.
The range is key in this decision as well: The 737 MAX’s performance allows GOL to reach the U.S. much more efficiently than a widebody. That, and the 15 percent fuel savings that the LEAP engines allow, make an unbeatable argument for the decision of accelerating the fleet renewal. And that decision is resonating strongly in the region.
Another 737 MAX 8 operator, Aerolíneas Argentinas, is more than pleased with the results of the five aircraft operating its regional and domestic routes. Many decision-makers in the company are pondering the chances of a second 737 MAX 8 wave as a complement to the delayed and long-awaited widebody fleet renewal selection.
The Argentinian flag carrier has replaced the Airbus A330-200 with the MAX 8 on the Buenos Aires to Punta Cana route, with excellent results. Perhaps it’s time to increase the presence of the new generation of single-aisle aircraft on the long-haul routes and to decrease the widebody orders to a minimum.
Copa Airlines has recently acquired the 737 MAX 9, Norwegian Air Argentina is bringing a one-year-old 737-800 with Boeing’s Sky Interior cabin and more capacity and Azul Linhas Aereas increased its order of Embraer E195-E2 to replace its less-efficient older brother the E195. The actors will remain the same, but the technology will finally take the necessary leap that has been avoided in the region for years.
The incorporation of these new aircraft will serve the market, and the companies, in two very specific ways: it will help carriers to stay competitive while squeezing the last cent available for better profit and it will increase the safety of the operations in a region that it is still, as we said at the beginning, uncharted territory.
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