USA. The final day of conference sessions at the Summit of the Americas in Orlando provided delegates with a big picture view of the aviation market and the prevailing economic indicators that are affecting the region.
Copa Holdings and Copa Airlines CEO Pedro Heilbron opened by telling the audience: “What happens in aviation affects your business directly.” His airline has built its business around developing Tocumen Airport in Panama as a hub.
“When we first started there was not much connectivity (in the region),” said Heilbron, so Copa developed what it calls the Hub of the Americas at Tocumen. The airline specialises in connecting smaller, secondary towns and cities to its Panama hub. This way Copa drives volume out of Tocumen to other destinations. “These destinations are too small to be served direct and need to be connected through a hub,” Heilbron explained.
He said that duty free plays an important role in providing services for these connecting passengers at Tocumen.
Hitting the brakes
In terms of development there has been a cooling off. Heilbron said: “We have slowed our growth in recent years because of the economic conditions in Latin America. We hit the brakes, reacting to the situation, but we are still opening new routes.”
Despite “the last few years being tough, especially 2015 and 2016” Heilbron said the market perked up in 2017. “We thought 2018 would be the same but it did not happen. Brazil collapsed and Argentina went way south – they found a way to go even further down,” he said. “And other markets have been hurting since 2018 too.”
Looking ahead to later this year the airline is expecting a recovery in Brazil, but perhaps not Argentina. Devaluations in Argentina and Brazil hit Copa’s sales hard, he noted. The two markets account for 30% of its total sales.
Boeing has forecast that Latin America will pick up relatively strongly again in the next 20 years with 3,000 aircraft orders needed over that time. Orders from the region’s airlines for the next five years number about 1,000, with more than half from low-cost carriers.
Reasons to be cheerful
International Air Transport Association Regional Vice President – The Americas, Peter Cerdá looked at the region’s opportunities and challenges in preparing for the doubling of passengers over the next 20 years.
He told the audience that unique city pairs keep increasing while real transport costs have been falling. That is good news for duty free spending at airports. He also said that the airline industry was having a good period in terms of profitability. “We made almost US$33 billion, that’s almost a record year for us.” Cerdá said. “But there are winners and losers.”
Compared to the rest of the world per passenger (net) profit in Latin America is the second lowest – only Africa does worse. That is a party a reflection of how well the airlines are managed, said Cerdá.
Nevertheless in the period to 2037 Cerdá was optimistic. By then air transport in Latin America would more than double from US$156 billion in 2017 to US$353 billion. Meanwhile passenger traffic will rise from US$342 million to US$ 693 million.
Closing the session was well-known Director of M&S Consultores Carlos Melconian who summarised expectations from the US, Brazil and Argentina economies in 2019, based on both economic indicators and political events.
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