The entrance of a low-cost carrier (LCC) in the Colombian market in 2012, combined with an increase in domestic travel, has helped encourage expansion among the country’s top airlines. Major infrastructure deficits in outlying cities and rural areas, however, could limit growth outside major metropolitan centres.
The strong commitment that three private airlines – Colombia’s Avianca Airlines, Chilean LAN and Panama’s Copa Airlines – have shown in the past 10 years concluded with an excellent 2012, with the industry recording double-digit growth last year. Domestic passenger traffic increased 15% from 2011, while the international figure grew by 13%, according to the Colombian Civil Aviation Authority (Aerocivil).
The most recent report from Aerocivil, issued in early April, confirmed that the positive trend continued in the first quarter of 2013. In March, the number of passengers increased by 14.8% year-on-year, jumping from 2.39m to 2.08m. Growth was greater in the domestic market, rising by 19.6%, while the international figure increased by 13.6%.
Bogotá-based Avianca led the sector’s growth in 2012. The company – which merged with Salvadoran airline TACA in 2010 – accounted for 61% of domestic passenger traffic last year, up from 43% in 2011, while its share of the international market rose from 26% to 41%, according to CAPA – Centre for Aviation, a provider of aviation market data and analysis.
The increase in market share can in part be explained by Avianca’s decision to expand its domestic supply, both in terms of number of routes and frequency of flights, a move that may have been influenced by the entry of a new competitor, Colombia’s first LCC, VivaColombia, which opened for business in May 2012.
VivaColombia’s presence has altered market dynamics, with Avianca and other airlines lowering their prices in months following its launch. However, according to Manuel Leal Angarita, president of the Air Transport Association in Colombia (ATAC), this may not have been entirely due to the addition of the LCC to the market. “Contrary to what many people believe, the entry of a LCC was not the only reason why carriers have reduced their rates,” he told OBG. “High competition and 15% growth in passenger traffic nationwide have helped them to reduce costs, favouring the consumer.”
Meanwhile, VivaColombia transported 558,000 passengers in its first eight months of operation, according to Aerocivil, placing the LCC fifth in terms of passenger traffic behind Avianca, LAN Colombia, Copa Colombia and state-owned SATENA. The LCC has a particularly good month in December 2012, when it placed third after Avianca and LAN in terms of passengers carried.
The company’s growth is due in part to increased demand for air travel by Colombians, who find it difficult to navigate the country by road. “The Colombian air transportation model is unique in Latin America,” Leal said. “Given the lack of other modes of transport, air transportation has almost become a social cause.”
Indeed, domestic travel greatly increased in 2012 over the previous year: Flights along the Bogotá-Medellín route grew by 17%; Bogotá-Cali, 3%, Bogotá-Cartagena, 15%; Bogotá-Barranquilla, 5%; and Bogotá-Bucaramanga, 8%.
Also growing is the number of routes between intermediate cities, urban areas that are home to more than 500,000 people and expanding quickly. This includes flight connections between Barranquilla and Medellín, which saw passengers plying that route jump 192% from 79,000 in 2011 to 232,000 in 2012. Connections between Cartagena and Cali showed the highest percentage increase, albeit from a very low base, rising from 3500 passengers in 2011 to 101,000 passengers in 2012.
Despite this expansion, connections for smaller cities – such as Popayán, Riohacha and Ipiales – are still quite limited. Avianca is often the only option for consumers in these cities, offering daily flights to Bogotá, while the “social carriers” – state-owned SATENA and regional airline Aerolínea de Antioquia – provide a few weekly flights to Medellín, Cali and other major urban areas.
Bogotá is also attempting to position itself as a regional hub. Increasing capacity at the El Dorado airport could help in this respect, with the facility undergoing a $1bn upgrade and expansion. Once the project is completed, expected in 2014, the airport wil have 173,000 sq metres of terminal space, enabling it to house Avianca and the local operations of Copa, LAN and EasyFly, and be able to handle 28m travellers.
However, space could again become as issue if demand projections are realised: the airport received 20.3m passengers in 2011, and it is estimated some 30m will travel through the facility in 2016, rising to 46m in 2026. In April President Juan Manuel Santos announced that he was proposing an expansion of the Comando Aéreo de Transporte Militar (CATAM Airport), with the aim of transferring some domestic traffic there.
The strength of the air transportation industry, driven by a significant increase in domestic and international demand, suggests a promising future for the sector, tempered only by the need to improve the infrastructure necessary for expansion.