Ahead of the opening of CAPA’s first Latin America Aviation Summit in Cartagena, Colombia later today (11-Sep-2017), The Blue Swan Daily provides a ‘state of the nation’ overview of some of the key features of the evolving airline system, influenced particularly by new aircraft types, by new entrants and by new airline relationships, from alliances to bilateral partnerships and cross border establishment.
As technology advances, it is changing the way the world connects, driving down the cost of air travel and offering aircraft with greater range and capabilities than their predecessors. The Boeing 787 and A350 are fast becoming mainstays of the global long haul fleet, and are gradually being deployed and developing new market opportunities.
In short haul, the A320neo and 737 MAX narrowbodies have entered service and are already making their mark, opening up not just new routes, but allowing new operating models into entrenched markets.
Overall, in terms of connectivity, Latin America is enjoying its best ever systemwide coherence, buoyed by the arrival of those new generation widebodies like the A350 and 787, allowing longer distance routes to be served more efficiently. After a decline in the late 2000s, connectivity between Latin America and the rest of the world has been on the rise every year this decade, and the current northern hemisphere summer schedules show a fourth consecutive year-on-year growth of around 7%.
In the area of alliances, Latin America’s matrix of airlines and partnerships has changed drastically during the past decade, driven by the mergers of Avianca and TACA and LAN and TAM. The unsurprising, yet critical decision for LAN to pull TAM from the Star alliance to oneworld occurred just as Latin America’s economy weakened, driven by a recession in Brazil. But even as Latin America until recently suffered in the throes of an economic free fall, airlines based in, and serving Latin countries have worked feverishly to forge new partnerships and adapt their strategies to ensure they capitalise on the significant potential still inherent in the region.
Meanwhile, for Europe’s national flag carriers, network planning is still largely built around the respective home markets and the development of a hub and spoke network model from a principal base. However, there are important differences resulting from variations in the size of O&D demand to/from their hubs, in addition to factors affecting network planning such as geographical location and geopolitical events.
Their networks have also been affected by widespread LCC competition on point-to-point routes, often from low cost airlines that are non-local. European LCCs have a more liberated view of network planning. Many are open to any market that is under served and/or over priced, an approach that has driven the largest LCCs in Europe, although others remain more focused on routes from their home markets.
In the Middle East, the Gulf carriers are undertaking a stern review of their strategies, as times and models change. At the 2017 Dubai Airshow, Emirates could place an order for 787s or A350s, the medium-sized widebodies that lack the public attention of the A380 that Emirates has come to symbolise.
An order for a number of these seemingly modest aircraft marks an adaptation by Emirates to a new environment and may raise more questions about Gulf aviation’s confidence. Yet such an order would be another indicator of Gulf aviation recalibrating, preparing for the next phase of growth and ultimately seeking greater sustainability.
And, like the witch lurking in the shadows, the problem of skilled resources is steadily forcing itself to the fore. For years there has been much talk about the looming shortage of pilots. All this time, apart from some pockets of serious shortage – and the number of aircraft grounded due to unavailability of pilots is growing – the issue has been contained.
Now it is becoming a “fundamental” issue for any airline seeking to expand. That is not a good place to be. And even worse, little is seemingly being done to prepare for the looming crisis.