The battle for control of the fast-growing market from the US to Latin America is being fought in Miami, but American Airlines' dominance means some US majors are shifting their sights elsewhere. Karen Walker reports.

A tornado touched down in the heart of Miami earlier this year. Had the Wizard of Oz's Dorothy spun out of that twister and landed within the confines of Miami International Airport, her bewilderment would have been as complete as it was in the movie. This airport, with its rows of exotic airline names, bilingual population and Cuban coffee aromas, is as far removed from average America as the Emerald City is from Kansas. It is easy to see why the title of 'gateway to Latin America' rests so comfortably here.

But nobody at Miami Airport is getting much rest these days. The growth of the Latin American marketplace is attracting the attention of airports across the US, all eager to share in the anticipated fortunes. Forced to defend its territory, Miami Airport has embarked on a $4 billion expansion and development programme, part of which has turned into a hotbed of controversy as carriers negotiate over the delicate issue of who should pay for what.

Increasingly, airport bosses are treading the highwire between serving the needs of their long-standing and largest customer, American Airlines, and satisfying the other airlines that need access to Miami to achieve their own goals in Latin America. American, meanwhile, is also under the spotlight because of its overwhelming strength in the region, and all eyes are on both the airline and the airport as they vigorously defend their positions.

'We'll never be allowed to sit back again,' admits MIA's aviation director, Gary Dellapa. 'This market is looking too good to too many other people right now.' Not that MIA is in danger of playing second fiddle to anyone. It controls 67 per cent of US nonstop passenger traffic to South America, 59 per cent to Central America, 36 per cent to the Caribbean, and 9 per cent to Mexico. New York/JFK ranks a distant second in terms of weekly scheduled nonstops to South America, with 110 flights versus MIA's 409.

In terms of cargo, MIA's strength is even more daunting. It handles 109 weekly nonstop, all-cargo flights from the US to South America - 96 per cent of the market - as well as 94 per cent of the traffic to Central America, 79 per cent to the Caribbean, and 14 per cent to Mexico.

Nobody doubts that the Latin American market will continue to grow and several forecasters admit that their predictions may be, if anything, a little too cautious. At MIA, which handles 34 million passengers and 1.8 million tons of cargo a year, the annual growth rate has been hovering at about 10 per cent in recent years. A Federal Aviation Administration study predicts that the airport's annual passenger count will rise by 115 per cent between 1995 and 2010, to reach nearly 70 million. The forecast average growth rate for the 100 largest US airports is only 69 per cent.

However, MIA is under pressure from all directions as carriers fight for their share of this lucrative market. Its largest customer, American, accounts for around half of its traffic and its continuing efforts to seal codeshares and alliances with Latin American airlines, such as Avianca and the Taca Group, leave no doubt about its keen focus on this market. 'It's a fact that Latin America is a growing marketplace for us for both business and pleasure travel,' says an American spokesman. 'A great part of that traffic exists on behalf of people who live in Latin America and who come into Miami to shop or to visit relatives. Miami is regarded as an extension of Latin America. All the economies are growing and becoming more stable, so all this bodes well for this dynamic marketplace.'

To cope with this growth and with increasing competition, American stresses that it must have a 'world class facility' at Miami and admits it has been frustrated by the slow progress of development work until now. A key sticking point, still not fully resolved, has been a dispute over funding of a $1 billion so-called Super A concourse project that will, by 2004, provide American and American Eagle with 47 new jet gates, each capable of handling international flights, and 29 regional aircraft gates. Work is scheduled to begin this year, but has been delayed by legal protests from other airlines - namely Air Canada, Delta Air Lines, Lufthansa, Trans World Airlines, United Airlines, and US Airways - which object to helping to fund a facility that will be used only by American.

A Department of Transportation judge ruled in favour of the opposing airlines earlier this year, but that ruling was overturned by new transportation secretary Rodney Slater, prompting American's chairman and chief executive officer, Robert Crandall, to call upon the other airlines to 'step aside and let work begin'. They have not heeded his message, however, choosing instead to turn to the appeals court.



That appeal is worrying to both American and the airport. The airport, like others around the US, does not like the idea of Washington interfering in how it raises and manages its funds and will fight to protect its autonomy. American points out that the current system has been in place since the 1980s and that it has had to fund over $200 million of projects completed for the benefit of other airlines. 'No-one stood in the way then,' says American.

But they are standing in the way now. United Airlines' chairman and CEO, Gerald Greenwald, says his airline's costs will go up by $30 million a year under the current proposal. 'We will fight that,' he says. 'We hope to win in court because if we lose, our costs for each route in and out of Miami will go up.'

Greenwald says United will not go mad about that, but it will consider more nonstop flights to Latin America from other US airports. United, which has 202 weekly flights between the US and Latin America, is adding a new nonstop service this year to Sïo Paulo from Chicago/ O'Hare. 'Airports have to compete with other airports for our business,' says Greenwald, in a clear warning to MIA. 'Competing costs means lower costs and better service.'

Continental Airlines and Delta have already made it clear that they will pursue their Latin American goals without MIA - Continental through its hubs at Houston and Newark and Delta through Atlanta and Cincinnati. 'We totally disagree that you have to be in Miami to be successful in Latin America,' says a Delta spokesman.

'The Latin American market is growing and we don't think you can restrict everything to Miami. Traditionally, that has been the market we have been in, but many business and leisure travellers today would prefer to go direct and not through Miami, so we will build up a number of flights from Atlanta or Cincinnati.'

In June, Delta began a daily service from Cincinnati to Atlanta and on to Sao Paulo and Rio de Janeiro. The airline has also filed for permission to begin a service to Chile. Continental has also begun serving Brazil, and has applied for rights to Venezuela and Chile (see feature, page 34).

United's threats to go elsewhere have to be taken much more seriously, however, by MIA, which is courting that airline for its proposed new J concourse on the opposite side of the airport building from the A concourse. This is not a good time to have to field United's obvious displeasure. 'We feel that Miami has broken ranks,' says United's vice president of international affairs, Cyril Murphy. 'It used to be that all carriers were equal because they offered point to point service to each airport. So the approach that said everybody benefits from new construction at an airport was right because all airlines got the same treatment when their time came. It was largely a non-discriminatory approach.

'But things changed when we went to the hub and spoke system. Where a carrier builds up a hub and is expected to stay dominant for the foreseeable future, the others are competing at a unique disadvantage. No carrier can pretend that all airlines will benefit equally when only one carrier will use that facility - you cannot maintain that illusion.'

Murphy maintains that Miami is the first city to impose costs generally on the non-hub carriers. 'Miami is very important,' concedes Murphy, 'but it seems to us that the situation is becoming very difficult because each customer wants to pay value for money for the service it receives, not a premium - especially when that premium subsidises its competitor. To us, this issue is very black and white.'

Murphy points out that several other airlines are developing niche markets to Latin America because they see that they cannot be competitive at Miami. Murphy says that MIA is a crucial point in what he describes as the iron triangle of global aviation. Along with London/ Heathrow and Tokyo/Narita, Miami has a unique geographical location, a deep-rooted history and a dominant carrier. 'Moreover, the strength of each of the carriers at their respective hubs is daunting,' says Murphy. 'The potential for effective intrahub competition is minimal.'

Against this charge, MIA replies that its mix of airlines remains highly varied with some 100 scheduled and 40 non-scheduled carriers using its services. But with American so dominant and with the other US majors looking elsewhere, the non-US carriers which need feed from other US cities are left with little choice other than to sign a codeshare with American, if regulatory constraints permit.


Environmental impact

The airport authority also dismisses the accusation, mostly from other airports, that it is effectively a landlocked airport with little or no room for expansion. Land is earmarked for a proposed new fourth runway which would accommodate commuter aircraft and thus free up the existing runways for more large jets. But that project has to survive an environmental impact study as well as competition for funds from other sectors in the Miami community.

MIA is a landlord airport. It is owned by and pays rent to the Dade County local government. On the one hand, that allows for a close relationship with the local authorities; on the other, it means that projects such as a new runway can only be pursued with care and the appropriate sensitivity.

Among the US airports that might well succeed in capturing some of the traffic that has so far stayed loyal to MIA are those that are closest geographically. Three other Florida airports, at Fort Lauderdale, Orlando and Tampa, are aggressively promoting what they regard as their advantages over Miami, especially space. Tampa Airport's director of international commerce, George Elbe, says he 'blitzed London' three years ago until he finally grabbed British Airways' attention and persuaded the airline to start a three times weekly service. 'Now we want to do that with South America,' says Elbe. 'The next target is Brazil.'

Orlando may have Mickey Mouse, but Tampa boasts nearby beaches and the Busch Gardens theme park. According to Elbe, Brazilian visitors to Busch Gardens outnumber any other nationality, so the airport intends to cash in on that advantage. Tampa's Project 20:20 aims to increase annual passenger traffic from 14 million today to 20 million early in the next century, after which it will build a second terminal. 'We are giving people the news that they could have an operation out of Tampa that is second to none and where they will not face congestion,' says Elbe.

Robert Bullock, executive director at Orlando Airport, similarly talks of 'aggressive' expansion plans. 'Historically, northern Europe was our market, but we are expanding into Latin America and are now looking to Asia as well,' he says.

But Miami has expansion plans of its own that fall outside of mere construction work. Deputy director of aviation Amauary Zuriarrain believes that international-to-international through traffic, feeding passengers and cargo between the South American, European, Asian and even African continents, will become increasingly important to MIA. To accommodate this, the airport is emphasising swing gates, that can be either domestic or international, and plans to double the retail space for a captive market that has a few hours to spare before the onward journey to the next continent.

MIA has also signed a marketing agreement with Madrid Airport and has forged close links with Frankfurt Airport so that the interests and opportunities of each can be promoted by the other. 'I believe that alliances between international airports, similar to what is happening now among the airlines, are the next major step in commercial aviation,' says Zuriarrain.

Guillermo Carreras, MIA's planning and programming director, recognises the challenges ahead. 'There is a little bit of catching up to do,' says Carreras. 'But what is going on here is a metamorphosis. I tell people that we are now at the lava stage, but in three or four years this will become a beautiful butterfly.'

Most people like butterflies, especially exotic Latin American varieties. It remains to be seen whether this particular species will emerge as a true global crowd-pleaser.

Source: Airline Business