Latin American carriers are at a disadvantage to their US counterparts on services between the two regions. Bob Booth, chairman of the AvGroup, offers some suggestions on how to balance the scales.
In the July issue of Airline Business, Carole Shifrin wrote about AvNews' 10th International Airline CEO Conference in an excellent article and touched on the issues affecting the Latin American and Caribbean aviation industry.
She highlighted the US International Aviation Safety Assessment (IASA) programme which affects carriers from 22 countries in the region which are in Category 2 [for safety oversight] and whose airlines cannot therefore add capacity or place new aircraft for service to the USA. While all of us linked to the industry support the FAA's IASA programme, we would like to focus on the idea that the programme gives US carriers an unfair advantage.
While we do not believe this perception is correct, it exists. The problem that carriers from Cat 2 countries cannot add capacity while US carriers continue to add as they see fit is easy to fix. Some believe the countries don't want to restrict US carriers because they need the service and do not care if their national (most,if not all now privately owned) carriers cannot add capacity as long as the US carriers can.
This is easy to change: the FAA, with the help of the Department of Transportation, should freeze the capacity of the US carriers serving a Cat 2 country. If safety is found to be inadequate, it penalises the national carriers, with the idea that this will force governments to take action.
Some countries, such as the Dominican Republic and Venezuela, have been in Cat 2 since 1994 when the programme was introduced. A lack of "political will" and/or politics, coupled with corruption and stupidity, has not produced the necessary changes to get the countries back to Cat 1 status.
There are exceptions, such as Bolivia and Peru, which have returned to Cat 1, but most of the countries are stagnating in Cat 2. The accompanying table shows how the US carriers' market share has grown since 1990. While Cat 2 is not necessarily the cause of this growth, the table shows that US carriers do not need FAA assistance.
How can these issues be resolved? First, the USA should freeze the US carriers' capacity into Cat 2 countries. Apart from levelling the playing field, this would put far more pressure on the countries involved than anything else. And the US carriers would also lobby those countries to take steps to regain Cat 1 status sooner.
Second, open up the US market to Latin American carriers so they can serve major domestic points while offering cabotage within the USA on direct service to and from Latin America - as is being proposed for NAFTA countries. Foreign ownership in the region at large should also be opened up.
These actions, while perhaps not solving the market share issue, would dispel the current perception that Latin American carriers are unfairly treated and prove that the USA sees Latin America as a real partner in the development of air transportation throughout the region.
While foreign ownership may benefit US carriers, it will provide new capital for Latin American carriers in need of equity partners and US technology. It could also allow foreign carriers to invest in a US carrier.
This is wishful thinking perhaps - but a good idea, both economically and politically, at a time when the USA needs all the friends in the western hemisphere it can get.
Source: Airline Business