The airline industry in Latin America and the Caribbean region has seen the fastest recovery from the COVID-19 crisis. Through April 2022, international revenue passenger kilometers (RPKs) in Central America had rebounded to 96% of 2019 levels, followed by the Caribbean with a 75% recovery and South America with 74%.
Simple Flying recently spoke with José Ricardo Botelho, executive director of the Latin American and Caribbean Air Transport Association (ALTA for its name in Spanish). We discussed the recovery of the region and the challenges that remain. That’s what he told us.
The significant progress towards recovery made in April was mainly due to the fact that travel restrictions imposed by governments on international traffic were relaxed or removed. At least six Latin American countries have fully opened their borders, Botelho said. These are Mexico, Costa Rica, El Salvador, Argentina, Cuba and the Dominican Republic.
The domestic market was less impacted by the restrictive measures affecting international traffic. Several countries in the region have seen an accelerated recovery from pre-pandemic levels, such as Colombia, which exceeded its 2019 levels by 30% for the month of April, followed by Mexico, with 6% above its 2019 levels.
One of the main reasons for this sustained recovery is that the aviation industry is vital to maintaining the fluidity of the economy in the region. José Ricardo Botelho supported,
“I believe one of the main reasons is the geography of this region and the lack of other means of transportation as efficient and safe as air travel. We are a region with continental-sized countries like Brazil, with islands, mountain ranges, deserts, etc. Also, for the most part we don’t have long distance trains or highways.
Latin America’s airline industry has seen the fastest recovery from the COVID-19 pandemic. Data: ALTA
The tourism industry is another reason for the sustained recovery of the airline industry in the Latin American region.
After two years, we are seeing a travel boom during the summer, which has caused chaos in many countries, including the United States and Europe. People desperately want to travel and Latin America has become one of the most sought after destinations.
For example, Latin America and the Caribbean regions are top tourist destinations for American travelers in 2022. Sun and beach destinations such as Cancun, San José del Cabo and Oranjestad have become favorites for the average American traveler.
Several challenges remain and the rise in fuel prices is of greatest concern to the Latin American airline industry. Photo: Getty Images.
Despite this excellent news, some challenges remain. Jose Ricardo Botelho said:
“Achieving full openness remains a priority and continuing to work on improving competitiveness so that the airline industry, which has been deeply impacted, can resume its growth path.”
The region still has great potential for growth. While in Europe and the United States a person travels on an airplane about 2.5 times a year, in the Latin America region a person travels only 0.6 times a year.
Rising fuel prices are a worrying trend for the Latin American airline industry. Fuel accounts for around 30% of any airline’s operational costs, and for Brazilian carriers, that percentage rises to 40%. Fuel is currently 121% more expensive than it was in January 2020.
“It is important to note that the industry expected financial losses for airlines in 2022. These losses were estimated when oil was at $70 a barrel. The fact that it is higher than US$110 threatens the financial viability of airlines.
Finally, ALTA noted that sustainability, staff shortages, inflation and exchange rates are other challenges in the Latin American industry.
Jose Ricardo Botelho added,
“Despite the challenges, the demand is there. Our region needs air transportation as an essential service. According to a panel of experts consulted by UNWTO, in the case of the Americas, 11% of experts believe that the region has already recovered or will do so by 2022, while 48% agree that the recovery will take place in from 2023.”