As delegates sign up for the Network LatAm conference, taking place in Costa Rica on 5-7 December, US low-cost carriers are looking to up their activity in this relatively untapped market, writes Brendan Sobie in Washington
The 2007 expansion of Spirit Airlines into Central America was groundbreaking in many respects. Not only did Spirit bring an entire region its first taste of low-cost service, but the carrier also boldly entered four Central American markets in a four-month window.
As Spirit chief marketing officer Barry Biffle recalls, launching service to Costa Rica, Guatemala, Honduras and Nicaragua in mid-2007, followed by Panama at the beginning of 2008, was simply "pragmatic" as the region was "starving" for low fares and represented the last white spot in Spirit's network.
"Basically we were left to fly to Central America," Biffle explains. He adds that it made sense to group the new routes because they were not large enough to support daily service.
Fast forward three years and Spirit is still active in the same five Central American markets although, excluding Costa Rica, it offers less than daily services. Spirit is also still the only low-cost carrier in all the countries, with the exception of Costa Rica which was able to attract Frontier Airlines in late 2007 and JetBlue Airways in early 2009.
Juan Santamaria airport in
Over the last three years the rate of US low-cost carrier expansion has been much more rapid in other international markets, such as the Caribbean, Mexico and Colombia. Central America remains relatively underserved with virtually no bilateral restrictions, making it a natural place for US low-cost carriers to direct their capacity as they intensify their search for new routes outside the mature domestic market.
For example, JetBlue is evaluating new routes to Costa Rica, beyond its current Orlando-San José link. It is also launching services to all six of Central America's other countries.
"For the most part we are working our way down the list," says JetBlue vice-president network planning Scott Laurence. "Central America will clearly be part of our growth plan."
Laurence adds that JetBlue's network planning team is spending "a lot of time looking at what we can do in the region" and working with local tourist boards and governments. "We see a willingness and eagerness to get JetBlue into these countries."
Meanwhile, Biffle from Spirit adds: "We expect to be bigger in Central America next year than we've ever been. There is some growth there and we plan to exploit it." He says Spirit's expansion will include "adding capacity to all our Central American markets by next spring". Fort Lauderdale-based Spirit is also "interested in serving El Salvador and I expect to be there in the next 12 to 18 months".
El Salvador and Belize are the only two Central American countries that have no low-cost service. Spirit is looking at both but, unlike most of Central America, Belize is predominately a leisure rather than visiting friends and family market, which is typically Spirit's forte. "We'll be there someday but it's not in the immediate horizon," Biffle says.
Belize, however, is high on Frontier's hit list as the carrier looks for new leisure-focused international markets. Frontier vice-president of strategy and planning Daniel Shurz is also evaluating two other popular Central American beach destinations - Liberia in Costa Rica and Roatan in Honduras.
He says Frontier sees unique opportunities for growing its low-cost international routes from the central and western USA because Spirit, JetBlue and AirTran Airways only operate international flights from their east coast bases. "Until Southwest starts international services, we're unique," Shurz explains.
He says Frontier, which also serves Mexican beach destinations with up to 24 flights on peak winter days from Denver, Indianapolis, Kansas City and Milwaukee, is currently looking at linking Denver with Belize City, Liberia, Roatan as well as Grand Cayman and Montego Bay in the western Caribbean. Shurz explains: "We made a bet on San José and did it right. We may make a bet on one or two Central American or Caribbean markets."
Shurz says Denver-San José "has been a good market" since Frontier entered with four weekly flights. Frontier now serves San José daily during the summer and winter, plus five weekly flights in spring. For now it pulls out entirely in autumn, making Costa Rica a "long seasonal" market, but Shurz says: "At some point, we may try a low frequency option during the low season."
JetBlue has served Orlando-San José daily since its inception and the airline added capacity in February, when it upgraded the flight to an Airbus A320 from an Embraer 190.
Laurence from JetBlue says while the route "started right at expectation, it's really taken off the last few months. We plan on having the A320 around the year. I think it's the right airplane for the route and we got the load factors to justify it."
Unlike Frontier, which only sells a small fraction of its Denver-San José seats in Costa Rica, JetBlue sells about half of its Orlando-San José seats locally. "We've reached our expectation in terms of the point of sale market which is very important to us," Laurence says.
Spirit has also added capacity on its Fort Lauderdale-San José route with a second frequency five days per week in the current summer season. Biffle explains that Spirit will pull the additional frequency in the autumn, but the airline plans to bring it back in the winter and, at that point, keep it year-round. "Our plan is to do double daily," he says. "We've continued to grow our presence in the market and we feel it's time to add more capacity."
Biffle says San José's large US expatriate population helps make it the largest Central American market. Costa Rica also enjoys a strong balance of leisure and visiting friends and relations traffic.
Aeris, the consortium that operates San José's Juan Santamaria airport, says traffic through the first half of 2010 was up 6% to 1.7 million passengers, driven by the low-cost expansion along with new routes from American Airlines and Aeromexico.
Aeris chief operating officer Tom Bartlett says attracting JetBlue, Frontier and Spirit "just happened" as the airport has not had an organised air services development programme. But he says Aeris recently put together a team which will drive a new airline recruitment initiative, starting later this year. A fourth US low-cost carrier, AirTran, is on Aeris' wish list as well as European and South American carriers.
"We want to get out in the frontline and be very aggressive," Bartlett says. "We're open to partnering with anybody to help promote our traffic and their traffic at the same time."
He adds Juan Santamaria now has the space to recruit more carriers following a $35 million expansion programme, which was completed in July. The project resulted in an expanded immigration hall with 36% more capacity and an expanded lobby with 50% more screening points and 35% more check-in counters. Bartlett says a new master plan, looking at long-term growth including additional gates, will be completed by the end of August.
For more details about Network LatAm 2010, go to: flightglobal.com/NetworkLatAm
Source: Airline Business