As economic expansion continues to expose weaknesses in the country’s transport network, the government is channelling investment into renovating domestic infrastructure. The air sector in particular has been receiving much attention, as some of the country’s busiest airports face capacity constraints.
Air traffic in South America has been climbing each year, with Latin American airlines seeing a 5.9% rise in demand in June 2015, compared to the same period in 2014, according to figures by the International Air Transport Association (IATA). Due to its central geographic position, Peru will continue to benefit from this upward trend. But in order for the country’s airport facilities to fully compete with regional peers, infrastructure renovation will be key.
Growth has been driven by an improving economy stimulating consecutive years of double-digit growth in passenger numbers. This has been reflected in the number of international flights servicing Peru. Moreover, an increase in international passengers and cargo has been compounded by a more dynamic domestic air sector, led by business expansion across the country’s regions. Peruvian airports mobilised a total of 8.6m domestic and international passengers between January and June 2015, a 9.9% rise year-on-year from 2014, according to figures by the Ministry of Transport and Communications (Ministerio de Transportes y Comunicaciones, MTC). Of this number, 4m passengers were attributed to international flights and 4.6m were domestic.
The decision by Avianca and LAN to choose Peru as a strategic hub for connecting the Americas has also contributed to the increase in overall passenger numbers. In 2014 there were over 1m transit passengers, according to figures by the Association of Foreign Air Transport Companies (Asociación de Empresas de Transporte Aéreo Internacional, AETAI). “This is a figure that was not thought of before, but now it is becoming important for the current business model of the airlines that have established a hub in Lima, and of course it is also becoming more important for the airport operators as well,” Carlos Gutié rrez Laguna, general manager at AETAI, told OBG.”
As of June 2015 there were a total of 29 airlines operating international flights from Peru, with links to 38 cities, in addition to five companies operating within Peru’s domestic market, according to the MTC.
The capital’s Jorge Chávez International Airport remains the country’s most important facility. Managed under a concession agreement since 2000 by Lima Airport Partners (LAP), it received a total of 16.1m passengers in 2014, according to figures by AETAI. Mounting passenger numbers have put a strain on capacity. “The airport was initially designed for 7.5m passengers per year, and improvements in efficiencies have allowed it to reach 10m passengers in terms of capacity. But now we are way over that during peak times,” Gutiérrez told OBG.
Despite its role as the country’s most important air traffic platform, the airport is weakened by the fact that it relies on a single runway. Being the only facility in Peru suited to receiving international flights, the air sector’s capacity is fully dependant on Lima’s airport. “It is very negative that one airport with a single runway is the only air entrance into the country,” Gutié rrez told OBG. “If there is an accident or the runway cannot be used, then all air traffic will be blocked. Further to being the sole international air link, the capital’s airport is also a passageway for linking the north and south of Peru, as the domestic air market for city-to-city flights is still under-developed.”
These difficulties are expected to be partially addressed by the large-scale renovations currently taking place at the airport. An $850m project will involve the construction of a second runway, new aircraft parking slots and a brand new passenger terminal. The new infrastructure at the Jorge Chávez airport is expected to be fully operational by 2021.
Nowhere To Land
However, expansion of the airport has been hindered by problems of access to allocated land. Under the concession agreement, land for expansion was initially to be made available to LAP by the government in 2005, but issues with the expropriation procedure made this impossible. Authorities are hoping that the necessary land plots will be passed on to the concession holder in time for construction work to begin in early 2016.
Linking The South
Domestic and international air links will benefit significantly from the planned construction of a new airport in the southern city of Cusco, which acts as a gateway to the Incan ruins of Machu Picchu, Peru’s renowned tourist attraction. The development, valued at approximately $658m, involves the construction of a brand new facility in the nearby area of Chinchero, as a substitute to the existing Alejandro Velasco Astete Airport.
Due to its location within the city and the proximity of a mountain range, which makes it impossible to receive bigger airplanes, Cusco’s current airport has limited growth opportunities. The project was awarded on April 2014, under a 40-year concession deal, to the Kuntur Wasi Consortium, comprising Andino Investment Holding, a Peruvian group, and Argentine company Corporación America. Construction will begin in 2016 and is scheduled to take three to five years. When fully operational, it will have the capacity to handle 3.3m passengers annually, but the available space is sufficient to allow further expansion to handle 4.5m passengers by 2030.
Besides the importance of expanding capacity close to one of Peru’s key tourism areas, the new Chinchero airport will also add more flexibility to the country’s air transport sector by opening up a second option for international flights. Altitude might pose a problem for the airport to function as a fully-fledged international airport, however. Airplanes departing from Cusco’s new airport, located some 3700 metres above sea level, will be unable to take off at full weight capacity, as planes taking off at higher altitudes require more power. This restriction may be resolved through a stopover in Lima, in order to complete the share of missing passengers and cargo.
Recently inaugurated was the revamped airport in the city of Pisco, 250 km south of the capital. The facility, managed by concession holder Aeropuertos del Perú, received up to $52m in private and public financing and will be equipped to receive international flights. Although an alternative entry point into the country is desirable for the sector, the IATA has warned that attracting international airlines into the refurbished airport might be difficult due to its close proximity to the capital’s Jorge Chávez Airport. Pisco could nonetheless play a key role in increasing domestic links in the country, and reducing the dependency on Lima to link the north and the south of the country by air.
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