Airline Distribution Conference

 The Latin American Air
   Transport Industry
       Alex de Gunten
     Executive Direct...
AITAL
Latin American Airline Asociation
  Over 30 members in Latin America &
•

  Caribbean
  New focus on partnerships
•
...
AITAL
Executive Committee (2006)
  Pedro Heilbron, Presidente COPA (Presidente)
  Roberto Kriete, Presidente de TACA (Vice...
The Latin American Airline Industry
                represents
    42 Countries and 574 Airports
•   >1.1 million tons of ...
Main markets - Passengers
Total O/D Passengers 2002 (millions)
40

                           Two domestic markets among
3...
Pax traffic still very concentrated
  Brasil and México represent more than 60% of traffic

100%            67            ...
3 of the 10 principal growth markets in
                       the world are in our region
 World                         ...
80% of the traffic, measured in passengers,
       takes place inside Latin America
            (domestic + intralatam)

D...
Fastest Growing Latin American Airports - 2005
         (Airports with 100k to 10m Enplanements)
                         ...
2005 Traffic Trends




Traffic By Month Consistently Higher
In 2005, AITAL airlines reported
  12.1% traffic growth vs. 2004




                                      Reporte tráfico...
Market perspective;
        Latin American aviation specificities:
Small domestic markets (except Brazil and Mexico)
Immat...
Great opportunities ahead
                                           Aviation, as a fraction of local GDP
                ...
The Future - Consolidation
within the Latin American
     Airline Industry
Consolidated key Suppliers             U.S. EXAMPLE


Commodity

• Air travel                         16
                 ...
Airlines Operating to LATAM


            Total         LATAM   Other
 2001:      183           100     83
 2002:      179...
An overview on Aviation in the region,
    according to Airbus Industrie




                                   2004/5
Code-sharing or entering into global alliances have been successful
       ways to expand networks, thus increasing income...
Several M&As are creating strong regional
                blocks
    MERGERS / ACQUISITIONS /
                            ...
Some independent airlines that do not
  seem to be interested in being part of a
              global alliance



        ...
Main priorities in the region
             (2006)

Fuel Costs
Airport and navigation Costs
Distribution Costs
Distribution
• One shoe does Not fit all
• Simpler is Better
• Revenues will not go up
   – Focus on Costs
   – Internet M...
Low Cost Carriers in the
        region
Low Cost Carriers in LATAM
Several new and very succesful LCCs appeared in the last 4 years
Brazil and Mexico
Bilateral re...
The Future – Opportunities
The Opportunities …….and
              Challenges
In spite of the difficult and challenging environment airlines are facin...
In summary…

For those with new business models, a
local focus and long term
perspectives…..the Latin-American
region will...
Thank you

  Alex de Gunten
adegunten@aital.org
   www.aital.org
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  1. 1. Airline Distribution Conference The Latin American Air Transport Industry Alex de Gunten Executive Director, AITAL
  2. 2. AITAL Latin American Airline Asociation Over 30 members in Latin America & • Caribbean New focus on partnerships • New LCC’s members •
  3. 3. AITAL Executive Committee (2006) Pedro Heilbron, Presidente COPA (Presidente) Roberto Kriete, Presidente de TACA (Vicepresidente) Enrique Cueto, Vice-Presidente Ejecutivo Grupo LAN Emilio Romano, Director General Mexicana Marco Antonio Bologna, Presidente TAM Fabio Villegas, Presidente Avianca Executive Director Alex de Gunten Working Groups Operaciones Legal Técnico CFO Distribución Compradores de Materiales Aeronáuticos (CCMA) Carga Combustible
  4. 4. The Latin American Airline Industry represents 42 Countries and 574 Airports • >1.1 million tons of cargo • >89 million passengers (AITAL members 2005) • >US$14,100 million in revenue; 5.0% of world • 146,000 jobs: 83,000 at airlines and 63,000 at airports • >700 Aircraft • $2.7 Billions in losses (2001-2004) Latam represented 5% of the revenue but 10% of the losses • The industry is starting to show signs of recovery, but its accumulated numbers are still red Source: IATA/AITAL
  5. 5. Main markets - Passengers Total O/D Passengers 2002 (millions) 40 Two domestic markets among 35 the top-ten in the world 30 18.5 Domestic traffic 2.1 Other International 25 O/D to/from USA 28.5 20 12.2 6.1 15 3rd and 4th Intl US destinations (behind Canada and UK) 10 0.6 14.2 8.0 3.8 13.2 4.3 5 4.3 2.9 5.2 2.2 3.8 4.8 1.7 1.7 2.9 1.1 1.8 1.2 1.2 0.9 0.6 0.5 0 Mexico Brazil Caribbean Colombia CentralAm Argentina Venezuela Chile Peru Source: Airbus Industrie. FIDAE 2004: Lights and shadows of Latin American Aviation
  6. 6. Pax traffic still very concentrated Brasil and México represent more than 60% of traffic 100% 67 35 102 O th e r O t h er O th er A rg entin a A rg en t in a A rg en tina 80 Ch ile Ch ile Chile Colo m bia Colo m bia Co lo m bia 60 M exico M exic o 40 M exico 20 B razil B razil B raz il 0 Dom Int Total Fuente:OAG
  7. 7. 3 of the 10 principal growth markets in the world are in our region World 2004 RPKs 2005 - 2024 Rank Regional Traffic Flow (billions) CAGR 1 North America - Southwest Asia 1.33 13.4% 2 Middle East - Northeast Asia 2.23 10.2% 3 Middle East – Oceania 4.10 9.3% 4 China – China 110.21 8.8% 5 Africa - North America 3.77 8.2% 6 China - North America 33.22 8.0% 6 Southwest Asia - Southwest Asia 21.25 8.0% 7 South America - South America 52.56 7.4% 8 Africa - Southeast Asia 3.86 7.3% 8 North America - Southeast Asia 32.03 7.3% 9 North America - South America 40.57 7.2% 10 Central America - Central America 25.50 7.0% 12 Central America - South America 8.22 6.3% 15 Europe - South America 57.89 5.8% World Total 3,699.72 4.8% Source: Boeing Current Market Outlook.
  8. 8. 80% of the traffic, measured in passengers, takes place inside Latin America (domestic + intralatam) Domestic + intra-LatAm = 80% of total Domestic, North America roughly 1/3 each Report of monthly traffic January - December 2005 AITAL – DEFE
  9. 9. Fastest Growing Latin American Airports - 2005 (Airports with 100k to 10m Enplanements) South America Central America Passenger Percent Passenger Percent Market Enplanements Change Market Enplanements Change Iguassu Falls Brazil 764,385 43.3% San Jose del Cabo Mexico 2,345,158 30.7% São Jose do Rio Preto Brazil 318,832 31.6% San Luis Potosí Mexico 210,029 26.8% Boa Vista Brazil 124,539 26.4% Manzanillo/Colima Mexico 226,651 20.5% Ribeirão Preto Brazil 436,855 25.8% Aguascalientes Mexico 449,262 18.2% Natal Brazil 1,387,062 24.5% San José Costa Rica 2,764,720 17.7% Rio Branco Brazil 212,230 24.2% Tampico Mexico 365,662 13.6% Fortaleza Brazil 2,824,122 24.1% Culiacan Mexico 796,371 13.1% Cuiabá Brazil 800,992 22.9% Puerto Vallarta Mexico 2,475,388 12.7% Curitiba Brazil 3,688,234 20.9% Villahermosa Mexico 759,207 12.4% Macapá Brazil 416,201 16.1% Monterrey Mexico 4,863,949 12.2% El Calafate Argentina 355,714 15.7% Mazatlán Mexico 880,424 11.4% João Pessoa Brazil 290,118 14.7% Veracruz Mexico 619,211 10.2% Resistencia Argentina 128,160 14.5% San Pedro Sula Honduras 593,298 10.2% Recife Brazil 3,824,758 14.4% La Paz Mexico 544,047 10.2% Campo Grande Brazil 745,361 13.9% Quito Ecuador 3,268,403 12.9% Montevideo Uruguay 1,043,786 12.9% Belém Brazil 1,589,667 12.1% Rio Gallegos Argentina 200,641 11.8% Rio Grande Argentina 104,533 11.6% Brasília Brazil 10,220,052 11.5% Pôrto Alegre Brazil 3,433,424 11.3% Puerto Iguazu Argentina 457,869 11.3% Maracaibo Venezuela 993,776 11.1% Barranquilla Colombia 1,007,660 10.5% Ushuaia Argentina 448,833 10.4% Source: Airports Council International
  10. 10. 2005 Traffic Trends Traffic By Month Consistently Higher
  11. 11. In 2005, AITAL airlines reported 12.1% traffic growth vs. 2004 Reporte tráfico mensual Diciembre 2005 AITAL – DEFE Departramento de Estudios Económicos
  12. 12. Market perspective; Latin American aviation specificities: Small domestic markets (except Brazil and Mexico) Immature markets, only a small percentage of population flies Fragmented market, only 8 airlines with revenues ≥$500m Total Latam Fleet = 800 aircraft vs. one Major US Airline = 900 aircraft Low productivity. Very diverse fleet, less automation. Renewing aged fleet: Still 34% 1st-generation single-aisles; 35% 2nd-generation Weak financial health of a good number of airlines. Under capitalized. High levels of taxes and some exceptionally high infrastructure fees Periodic economic crises Source: AITAL/Airbus Industrie
  13. 13. Great opportunities ahead Aviation, as a fraction of local GDP Aviation as % of country’s GDP (%) 2002 revenue by airline 3.0 country of origin 2.24 2.0 1.72 1.58 1.42 1.36 1.43 1.16 0.91 1.0 3.6 0.82 0.54 0.52 0.50 0.37 0.35 1.1 0.25 0.22 1.0 0 USA BRA Eur MEX CHI ARG Carib COL C.Am VEN BOL PER ECU URU Other LA 0.4 1.1 0.08 In general, aviation represents a 0.17 4.9 low percentage of LatAm economies 0.14 (in revenue and employment) 0.7 1.4 0.06 1/5 of European market penetration Source: Airbus Industrie. FIDAE 2004: Lights and shadows of Latin American Aviation
  14. 14. The Future - Consolidation within the Latin American Airline Industry
  15. 15. Consolidated key Suppliers U.S. EXAMPLE Commodity • Air travel 16 – Suboptimal • Fuel contract 6 provisions • GDSs 4 • Price • Credit cards 4 • Escalators • Terms • Caterers 3 – Returns • Aircraf 2 accrue to t • Engines 2 suppliers • Pilots 1
  16. 16. Airlines Operating to LATAM Total LATAM Other 2001: 183 100 83 2002: 179 99 80 2003: 178 98 80 2004: 174 92 82 2005: 177 96 81 Source: OAG (2001-2005)
  17. 17. An overview on Aviation in the region, according to Airbus Industrie 2004/5
  18. 18. Code-sharing or entering into global alliances have been successful ways to expand networks, thus increasing income Today Future (?) ___ ? ___ ? ___ ? ___
  19. 19. Several M&As are creating strong regional blocks MERGERS / ACQUISITIONS / BLOCK CREATIONS TACA, LACSA, AVIATECA, TACA Perú, Volaris Regionals Avianca Ocean Air, VIP, Wayra Perú, Avianca LAN Chile, LAN Perú, LAN Ecuador, LAN Lan Argentina Dominicana, LAN Argentina AeroRepública (Colombia) Continental, Copa, AeroRepública
  20. 20. Some independent airlines that do not seem to be interested in being part of a global alliance Laser Avior Aerogal Interjet Sky Some of these, such as TAM, have chosen to enter into strong bilateral alliances.
  21. 21. Main priorities in the region (2006) Fuel Costs Airport and navigation Costs Distribution Costs
  22. 22. Distribution • One shoe does Not fit all • Simpler is Better • Revenues will not go up – Focus on Costs – Internet Mental Switch • Change will happen – Traditional Travel Agencies – GDS • New competition – Buses – LCC’s
  23. 23. Low Cost Carriers in the region
  24. 24. Low Cost Carriers in LATAM Several new and very succesful LCCs appeared in the last 4 years Brazil and Mexico Bilateral restrictions Modified Low Cost model
  25. 25. The Future – Opportunities
  26. 26. The Opportunities …….and Challenges In spite of the difficult and challenging environment airlines are facing worldwide, the Latin American airline industry has huge opportunities to profit from: • Intra-latinamerica traffic will continue to drive the growth due to infrastructure limitations (road/rail). Hence very encouraging growth opportunities in an immature market • Very strong management has proven itself during the hardest of times • Cost reductions will remain a priority. Relentless search for synergies and economies of scale. Great opportunity to leapfrog through technology • LATAM Customer Service Culture will continue to benefit Latin Carriers • Continue the restructuring processes that have so far granted positive results, suggesting a clearer horizon for the industry in the region.
  27. 27. In summary… For those with new business models, a local focus and long term perspectives…..the Latin-American region will provide significant revenue opportunities.
  28. 28. Thank you Alex de Gunten adegunten@aital.org www.aital.org

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