In its recent report, IATA Americas Focus presents an upward trend air travel in Latin America in the first half of 2017:
“At the regional level, the pace of RPK growth also recovered to a brisk 7.8% YOY for Latin American carriers. RPK growth in the domestic Brazil market returned to positive territory (+5.9% YOY) in March – the first time since July 2015.”
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Also, according to IHS Markit, “business confidence in Brazil moved above 50 for the first time since January 2015. Renewed political turmoil may mean this gain is short-lived. Confidence eased modestly in both Mexico & the USA this month.”
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These positive trends are consistent with those presented in Embraer’s 2017 Market Outlook.
According to the publication, after a decade of sustained economic growth in many countries in Latin America, economic output was negative in 2016 for the second consecutive year. Still, the region is at a turning point and gaining traction with economic turnaround and per capita income growth projected to start in 2017. However, this catch-up will be at modest growth rates in the short-term reaching 1.3% in 2017, 2.2% in 2018, and accelerating to 2.8% over the next 20 years.
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Growth opportunity
Propensity to travel, measured by the economic output per capita of each country, is an indicator of such opportunity. Comparing the region with a mature air travel market like the USA reveals enormous potential for growth: Latin America has 0.5 airline passengers per capita, a figure that is one fifth that of the USA.
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The case for right-sizing
A mix of large and small narrow-body jets gives airlines more flexibility to respond to a dynamic market environment. Right-sized aircraft, such as the E-Jets family, have been allowing Latin American carriers to offer a better combination of capacity and frequency, maintain service quality, and expand their networks with lower-density markets. Smaller-capacity aircraft are fundamental to gradually improving overall regional air travel connectivity in the region.
Azul Brazilian Airlines, for example, found that acquiring E-Jets was the solution for its goal of greater profitability. It could offer more frequencies than its competitors and more flexible schedules to attract high-yield customers.
In Latin America, Copa Airlines and AeroMexico have adopted a similar strategy.
Read the complete Embraer Market Outlook at www.embraermarketoutlook2017.com