Comment: Latin liberation

By:  
-
Source:
This story is sourced from Airline Business
Subscribe today »

It isn't too long ago - perhaps only a decade - when any description of Latin American air transport was followed by the unkind, but grimly accurate label"basket case". Carriers lurched from one crisis to another, hamstrung by underinvestment, poor management, state meddling, dismal infrastructure and corruption.

Some of the region's chief executives ruefully observe that sometimes it feels as if little has changed. And it is true that there remain frustrating barriers to progress and pockets of national practice that defy reason. But things have changed, and for the better.

Driven by a group of pioneering and determined industry characters, such as Captain Rolim Amaro and Federico Bloch, the late founders of Brazil's TAM and El Salvador's TACA respectively, LAN's Enrique Cueto, Copa's Pedro Heilbron and Gol's Constantino de Oliveira Junior, Latin American aviation is undergoing an inspiring renaissance.

These men battle a system that dogs efforts to innovate and expand. Despite the problems they are showing the way to an aspiring band of brothers. German Efromovich, with his Synergy group that is expanding rapidly across Brazil and Colombia, and now pushing into Central America and Peru with Avianca'stie-up with TACA, is the ­latest player to muscle his way into this Latin brotherhood.

The foundations of their success are built on the exploitation of markets that are ready and eager for their services. After the deep recession of 2002, Latin economies rebounded sharply. In 2008 GDP growth in the region topped 5% compared withbelow 2% for advanced countries but went to -2% this year with the recession.

The region will snap back, with forecasters putting Latin GDP growth in the 2% area for 2010. Against the backbone of strong economic performance, many countries are benefiting too from not being as closely aligned with US economic fortunes as before.

The hope must be that relative stability encourages states to pursue sound economic policies that promote the best airlines to continue their good work. There is plenty to do: markets need to be opened up; badly run airports need to be brought under control and air traffic control needs updating.

However, aviation in some countries is still under a cloud. Under-achieving Argentina has the market to flourish, but has a massive task to modernise its air transport industry and reputation. Venezuela is proving a tough market for outsiders to conduct good business. Financial controls mean airlines cannot take money out of the country and some have millions of dollars sitting idle in local banks.

As the Avianca-TACA move shows, Latin consolidation is in the air. Other moves could see regional powerhouse LAN in the thick of the action, especially if major shareholder billionaire Sebastian Pinera wins his bid for the presidency of Chile in December. If he is successful,he will have to sell his 26% stake in LAN.

This could open the way for new airline combinations. Some of the suggested ideas include a LAN-TAM tie-up while some have hinted at a LAN-Copa link. Then there is the future of separately owned Mexicana and Aeromexico, whose destinies must surely be entwined before too long.

Whichever way LAN's future and that of the Mexicans goes, there seems little doubt that two or three world-class and world-scale Latin airline groups will emerge onto the stage in the next 12-24 months.

So, for once, Latin America is leading the way. IATA forecasts the region's carriers will be the only ones globally that will break even as a whole in 2010. This is no accident.

Surely, the time has now come for commentators to finally throw away the "basket case" labelfor Latin America and celebrate the region's ­liberation of its airline potential.