Miami - Like
carriers in other parts of the world, Latin America's airlines are beset by a
bevy of challenges ranging from high fuel costs and taxation to distribution
dilemmas and infrastructure that can't keep pace with their growth. Those
challenges, however, coincide with the region's booming economic growth, its
tremendous influx in foreign investment, its brisk growth in GDP and the number
of people in the region living above the poverty line, noted Alex de Gunten,
executive director of the Latin American and Caribbean Air Transport
Association (ALTA) during a presentation here last month at a UATP conference.
But de Gunten also noted that "one out of three flights
in the region operates into or out of a congested or overcongested airport.
Yes, we are forecasted to grow a lot, but we better do a better job in terms of
planning our infrastructure." Referencing airport infrastructure rankings
published by the World Economic Forum, he said, "We seem to be going in
the wrong direction and this a major concern."
De Gunten also bemoaned fuel costs incurred by the region's
airlines. "You would think it would be reasonable given fuel production
[around the region]," he said, "but it's not the case."
Segueing into the conference's primary focus, de Gunten
added that "there are not many areas where airlines have a little control,
or can reduce costs. Distribution is one of them."
But, according to ALTA industry affairs manager Hernan
Sznycer, the region's airlines face online and offline distribution challenges.
The latter includes high global distribution system costs, travel agency
commissions that are "regulated in certain markets" and deficiencies
in distributing ancillary services.
Online distribution, meanwhile, presents both obstacles and
a huge opportunity. According to Sznycer's presentation, the challenges include
a "multiplicity of legislations and regulations," inefficient
infrastructure, fraud and relatively low credit card adoption.
Another fact is the relatively low rate of Internet
penetration in parts of the region, which means carriers must continue to sell
the bulk of their tickets through more expensive offline channels. But the
opportunity is in the growth trend. According to PhoCusWright data presented at
the conference, the compound annual growth rate for online travel during the
past five years was 31 percent, versus 1 percent for offline. "This is a
trend that we think will continue," Sznycer said.
Aeromexico senior vice president of revenue management and
distribution Ruben Martinez suggested direct connections "could be a
solution" and said the airline is "trying to develop solutions for
the mobile web." But he added that the region's "legacy carriers"
are facing "some delays in IT development."
At another Mexican carrier, Aeromar, chief planning and
commercial officer Fabricio Cojuc Wolfowitz
explained how, after interline relationships with Aeromexico and
Mexicana ended, "the most important thing we did was to rethink the
business model in terms of distribution."
Aeromar, he said, is a regional airline that operates 18
50-seat aircraft and primarily serves business travelers. Five years ago it
sold 5 percent of its tickets online; today that figure is close to 30 percent.
"In spite of restrictions we face with our legacy distribution platform,
we believe that could grow rapidly to 50 percent," he said. "So we
are putting a lot of focus on finding alternative means of distribution, and we
believe we are in a good position to grow revenue and passengers even more."
This report
originally appeared in the May 13, 2013, edition of Business Travel News.