Growth in domestic and international air travel has exceeded that of the national economy in recent years. In 2012, when Colombia’s GDP grew by 4%, the number of airline passengers (measured at the level of airport traffic) grew by 14.5%, reaching 24.7m, according to the Colombian Air Transport Association (Asociación del Transporte Aéreo, ATAC). While much of the credit goes to positive developments at the macroeconomic level, resulting in an increase in consumer spending and business travel, liberalisation of the air market has also exerted downward pressure on domestic and international airfares. Apart from competition pressures, regional airlines’ substantial investments in fleet renewal has led to greater fuel efficiency and lower prices.

DOMESTIC: Market dynamics have been most visible in domestic traffic, which has traditionally exceeded the size of the international segment. Although Colombia’s deficient road network undermines growth of many industries, it has helped domestic air travel to flourish, supported by the increase in leisure and business travel budgets and a reduction of domestic ticket fares. According to statistics from Aeronáutica Civil de Colombia (Aerocivil), the civil aviation authority, the number of domestic passengers passing through Bogotá’s El Dorado airport, the nation’s biggest, nearly doubled between 2006 and 2012 when 15.8m passengers were recorded, accounting for more than 70% of the total. This also constitutes notable growth on 2010, when the number of passengers grew from 10.3m to 14m.

By April 2013, Avianca held the leading share in the domestic market, at around 64%. Chilean carrier LAN came second with 21%, while Panama’s Copa Airlines came in third. The remainder of the market is shared between state-owned operator SATENA, EasyFly and new entrant Viva Colombia, Colombia’s first low-cost carrier. Over the course of 2012 the most popular domestic routes connected Bogotá to Medellín, Cali, Cartagena and Barranquilla. Two-way traffic on the Bogotá-Medellín route accounted for some 2.3m passengers, equal to 13% of the domestic market.

LOW COST: Viva Colombia operated its first flight in May 2012, connecting Medellín to Bogotá. While the company has secured licences on 32 routes in total, including international routes, it will focus on the cities of Bogotá, Medellín, Cali, Cartagena, Barranquilla and Bucaramanga for the foreseeable future. Modelled on to Irish low-cost carrier Ryanair, Viva Colombia aims to increase the size of the domestic market by minimising the cost of air travel. Routes are limited to pointto-point connections operated by a single type of aircraft, which maximises efficiency. While it is not the first operator to bill itself as “low-cost” – it faces competition from foreign cost-fighters such as US-based Jetblue and Spirit – it has lowered air fares more than its predecessors. “Previous models have often fallen short of successful low-cost models known around the world, and often included factors that pushed up prices like in-flight entertainment and free catering,” William Shaw, the company’s commercial director, told OBG.

Its entry brought prices of the Bogotá-Medellín route, the nation’s busiest, down from between COP300,000 and COP500,000 ($180-300) in 2011 to an average of COP200,000 ($120) in 2012. Meanwhile, the company claims it now controls 10% of the market. As shown by the stable passenger figures of incumbent players, Viva Colombia’s performance is largely derived from incremental growth in new customers generated through price reductions and new routes. While in the past most connections started or ended in the nation’s capital, operators are now focusing more on direct connections between intermediate cities.

OTHER PLAYERS: Meanwhile, Avianca has plans to launch a low-cost subsidiary called Regional Express Americas. While no details about the company’s launch date or focus were available at the time of writing, local papers La República and El Colombiano reported at the start of 2013 that a holding company had been established for this purpose in Panama.

Despite its achievements thus far, Viva Colombia’s efforts to keep fares low is faced with various challenges. First is the availability of cost-competitive airports, the pursuit of which led Viva Colombia to base itself out of Antioquia (where it uses the Jose Maria Cordoba airport), rather than Bogotá. Its ambitions for further expansion may be undermined by the absence of other similarly suitable airports. “The government remains focused on contracting high-end terminals with a multitude of additional services. The low-cost model doesn’t fit with that,” Shaw told OBG. Another obstacle lies in the comparatively high cost of fuel, prices of which are set by the government at a level exceeding the regional average. A third factor lies with the pace and feasibility of fourth-generation road projects. Provided these plans are rolled out on schedule and within budget, road transport will likely gain in consideration as an alternative to air travel for shorter journeys.

INTERNATIONAL TRAFFIC: The number of international passengers has grown more slowly than domestic traffic. Passengers at Bogotá’s El Dorado International Airport numbered 6.7m in 2012, up from 3.9m in 2006. After a period of stagnation between 2007 and 2009 growth has accelerated in recent years, averaging 16% since 2010. This is expected to increase at a similar pace as the nation’s economic rise, political stability and air space liberalisation are set to encourage international movements.

The most popular international route is Bogotá-Panama City, which is served 69 times a week by Copa Airlines and Avianca. This is followed by Lima, Peru, while Miami is the largest US destination for flights leaving Colombia. With only 500 fewer weekly seats than to Panama City on average, the Miami connection is served by Avianca, American Airlines and LAN.

Like the domestic market, Avianca maintains the leading market share in the international segment, accounting for half of all international seats and flights leaving from Bogotá. The company has a particularly strong network in the Americas, serving every nation on the continents. The Colombian carrier is followed by regional aviation conglomerates Copa and LAN.

The introduction of the open skies agreement between Colombia and the US, which came into effect at the start of 2013, as well as high load factors on existing routes bode well for rapid growth of bilateral traffic over the next few years. While Bogotá will retain the lead on US-Colombia air connections, the airport’s congestion is pushing some airlines to consider other cities such as Medellín, Cali and Cartagena.

ROUTE EXPANSIONS: Anticipating market growth, both the US’s JetBlue and LAN Colombia have announced expansion of their service. JetBlue plans to add Medellín to its two existing Colombian destinations from mid 2013 while LAN will upgrade to bigger planes on its Bogotá-Miami route and is also expected to announce new routes connecting Bogotá to New York and Los Angeles. At the time of writing, neither Avianca nor American Airlines (number two in the US-Colombia market), had announced expansion plans, but both are widely expected to do so. Other carriers connecting the US and Colombia include Delta, United and Spirit.

Outside of the Americas, El Dorado offers direct connections to Madrid, Paris, Frankfurt and Barcelona. In light of the recently completed international terminal, its operator OPAIN is keen to increase this list with other European, Middle Eastern and Asian destinations; it is actively promoting the airport in priority cities as a result. Some of the key targets are British Airways, KLM, Alitalia and Emirates. Aware of congestion at peak hours in the new terminal, OPAIN is incentivising quieter operating slots, particularly those between peak hours ending at 9am and starting at 8pm.

OPEN SKIES: These ambitions are aided by Colombia’s vigorous pursuit of open-market policies and international partnerships. A commercial aviation cooperation agreement was signed in May 2012 with China, allowing airlines from both countries to operate 14 weekly flights. As Santiago Castro, Aerocivil’s director general told media at the signing ceremony, “We are working to make sure that there is a clear regulatory framework so that Chinese planes could operate in Colombia with all the guarantees of security for their passengers and the Colombian aviation system.” The agreement was signed as part of Colombia’s push to align its air connections with aviation hubs in Asia, including Singapore and South Korea.

Sector liberalisation goes hand in hand with modernisation and the expansion of airport infrastructure. One such example is El Dorado’s new international terminal, which opened for operations in November 2012. The new facility has a capacity of 15m passengers, a significant increase from the 8m the previous structure provided. While some airline executives have concerns about the limited space for growth of the new terminal (passenger traffic in 2012, including domestic passengers, reached 22m) traffic conditions have improved, as illustrated by a decrease in flight delays. According to ATAC, the number of delayed flights due to weather and traffic conditions has hovered around 30% over the past three years while during the first two months of 2013 this had dropped to 23%. The association expects this progress to continue in years ahead.