This article is the first in a series that delves into the dynamic landscape of Latin America's aviation market, exploring the complexities of this evolving market by examining key trends, challenges, and opportunities for growth.
We begin by exploring the region’s connectivity, providing an overview of the current state of play.
Latin America's Aviation Market: Overview
- According to the United Nations, over half of the Western Hemisphere's inhabitants reside in the 33 countries comprising Latin America and the Caribbean - an estimated population of 670 million in 2024.
- Across those countries, OAG’s latest data confirms there are 151 airlines and 531 airports with scheduled services in September 2024.
- Notably, almost half of international capacity operates to other destinations within Latin America, while nearly 40% operates to North America.
- Growth is strong across the continent, with 39 million seats this September - a 5% increase from September 2023.
- At regional level, however, there are different dynamics at play, meaning that countries in Upper and Lower South America are experiencing growth, whilst capacity in the northern part of the continent, in the Caribbean and Central America, is contracting.
Colombia Leading Growth
Upper South America is experiencing the fastest growth in airline capacity in September 2024, with an increase of 18.5% year-on-year. Leading capacity growth is Colombia, where carriers have added 1.2m seats compared to last September, equivalent to a 29% increase.
The greatest volume increases are taking place in Colombia’s domestic market, driven by growth from Avianca who have added 0.4m seats compared to last year - potentially in response to competition from JetSMART, the ultra low-cost carrier (LCC) who started operating in Colombia’s domestic market in March 2024, and in September added 0.3m domestic seats. The domestic market in Colombia recorded year-on-year growth of 33% in September, with international capacity also experiencing strong growth of 16% year-on-year.
Capacity in Peru is also up considerably year-on-year, with carriers adding 16% more seats. The LATAM Airline Group is driving growth in Peru, with additional capacity also coming from Star Peru and JetSMART in the domestic market.
Lower South America is growing at a more modest 5.2%. Brazil, with its vast size, large population, and well-developed network of full-service and LCCs, is by far the largest market with 70% of all regional seats starting or ending there. Growth in the domestic market is steady, but international growth is much faster, with capacity increasing by 20% year-on-year.
By contrast, capacity in Central America is declining year-on-year, with a 2.9% contraction this September. Direct connectivity within Central America and between Central America and the Caribbean is limited, primarily reliant on the main hubs of major airlines in the region and requiring connections, often necessitating a stop in Panama, Mexico, Guatemala, or El Salvador.
In September, capacity to, from and within the Caribbean was down compared to last year with carriers operating 1.7% fewer seats. This is not peak season, however, and September always brings the risk of hurricanes, meaning tourists are less likely to travel. The largest country markets in the Caribbean are also those which are seeing capacity contract, including the Dominican Republic, Puerto Rico, Jamaica and Cuba.
The variation in growth rates across different parts of the continent highlights that significant disparities persist within the continent’s aviation networks. Major hubs like Buenos Aires, Santiago Lima and São Paulo attract a far greater number of direct connections compared to countries with less connectivity, for example at La Paz, Bolivia.
CONNECTIVITY VARIES BY REGION
Whilst overall Latin America's aviation sector is experiencing steady growth due to regional economic expansion, a burgeoning middle class, and the increased penetration of LCCs in major aviation markets with a robust domestic component, this aviation landscape is a story of contrasts. Countries such as Brazil, Colombia, and Mexico with vast territories, large populations, and a long history of aviation development lead the way, while others struggle to keep pace.
The leading major carriers in Latin America - including LATAM, Avianca, Aeroméxico, and Copa Airlines - shape the intraregional and domestic markets through their strength and market dominance. For example, the top five best-connected countries represent key hubs for a number of these carriers. Avianca’s home country of Colombia is top with 99 destinations served across the continent.
Looking at the share of international capacity that operates from each region to other parts of the continent shows that the countries of Upper South America (including Colombia, Peru, Ecuador and Venezuela) have the highest share of capacity operating to other regions across the continent with 73% of seats operating to Latin American destinations outside of Upper South America.
Whilst Central America is also relatively well connected to the rest of Latin America, with 55% of seats operating to destinations beyond Central America, airfares in Central America remain stubbornly high due to a lack of robust competition and connectivity. For example, flights between Nicaragua and Honduras, and even Costa Rica, are limited.
Unsuccessful attempts by low-cost airlines, like Volaris and VECA Airlines (Vuelos Economicos de Centro America), to establish operations in Central America have been hampered by high tax rates and a lack of a liberal regional regulatory environment, making pricing uncompetitive. Incumbent carriers like Copa and Avianca have also engaged in price discounting to counter competition.
Despite the absence of an inter-Central American rail network, many people opt for bus travel within the region due to competitive pricing and the presence of the Pan American Highway network.
The two regions at opposite ends of the continent are still much less connected – having a much higher share of capacity operating within region:
- In the Caribbean just 38% of capacity operating to destinations in Latin America operates to points outside of the Caribbean. In particular, direct connectivity between Central America and the Caribbean is also limited, primarily reliant on the main hubs of major airlines in the region and requiring connections, often necessitating a stop in Panama, Mexico, Guatemala, or El Salvador. This further extends journey times and increases airfares.
- In Lower South America, the share is even lower, with just 32% of seats operating to the rest of Latin America, suggesting that there is considerable scope for increased connectivity to the rest of Latin America. One of the key drivers here is geography, with the distance from Punta Arenas at the bottom of the continent to Bogota in the north extending to some 4,000 miles. The introduction of the extended range A321-XLR to some of Latin America’s carriers will help facilitate connectivity in smaller markets in a way that has not been possible until now.
WHITE SPACES AND UNDERSERVED MARKETS
The network map shows the routes that currently operate to other Latin American destinations for the 50 airports in Latin America that are the biggest or primary airport in their country. They total 954, but if they all had services to each other, there are a potential 2,450 route pairs that could be operated within the region. This indicates that nearly 1,500 route pairings are currently unserved, suggesting ample opportunity for growth in air services throughout the region.
The map shows hub concentrations in Mexico City, Panama City, Bogota, São Paulo, Lima, and Santiago.
This leaves significant pop ulations across the rest of the region underserved by the mainline carriers, and points to the opportunities that exist in this vast continent.
Stay tuned for the next article in our Latin America aviation market series, coming soon. In the meantime, take a look at some of our other Regional Market Focus blogs here.
