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Latin America Investment News on Viva Tropical

How Mexico’s Middle Class is Squeezing the Life Out of Its Airports

Article Summary:

Latin America air travel has seen a boom in recent years, thanks to ascendant economic growth and Latin America’s growing middle class, who are seeing gains in disposable income, making air travel more affordable and even more crowded.

Photo Credit: Big Story

Original Article Text From Wall Street Journal:

Latin American Carriers Fume Over Congested Airports

AviancaTaca, Colombia’s flagship airline and one of the largest carriers in Latin America by passengers, waited years for a new airport in Bogota, its main hub in the region. Yet when El Dorado airport opened last month—amid plenty of fanfare—expectations fell short.

Though the new airport replaces a decades-old and shabby international terminal, AviancaTaca executives are fuming that the new terminal has exactly the same number of gates as the old one.

“It’s new and certainly more attractive, but it’s already outdated in terms of capacity,” said Fabio Villegas, AviancaTaca’s chief executive. “The airport was born small,” AviancaTaca’s Mr. Villegas said Friday on the sidelines of an airlines conference in Panama.

The problems faced by AviancaTaca in the Bogota terminal underscore the infrastructure difficulties airlines face in Latin America, which has seen a boom in air travel in recent years. Thanks to ascendant economic growth, Latin America’s growing middle class is seeing gains in disposable income, making air travel more affordable.

At least one in three flights in the region departs from a congested airport, according to estimates from the Latin American and Caribbean Air Transport Association, an industry trade group, known as ALTA. “Even the new airports are not meeting passengers’ expectations,” said ALTA Executive Director Alex de Gunten.

“We are moving backwards in terms of airport infrastructure,” Mr. de Gunten said.

In the brand new Bogota terminal, some passengers still have to be ferried to their planes by bus. “Right now that airport should have twice the number of gates,” said Roberto Kriete, chairman of AviancaTaca’s board, who controls 33% of AviancaTaca.

The El Dorado airport was designed for 15 million passengers, while last year 21 million passengers flew through the older terminal. Also, the newer Airbus 330 models that AviancaTaca has purchased can’t dock in the new terminal.

The problems aren’t just in Colombia.

“Mexico is now bursting at the seams and everywhere else is difficult,” Mr. Kriete said in an interview.

From 2001 to 2011, the number of passengers flying in the region nearly doubled to 170 million, according to ALTA. And that number is expected to continue growing quickly over the coming years, ALTA’s Mr. de Gunten projects.

According to estimates from Airbus, Latin American airlines are set to purchase 2,120 airplanes in the next two decades to keep up with growth in passenger traffic, which is expected to increase 5.3% annually over the next 20 years.

In Brazil the stakes are high as the country prepares for the World Cup in 2014 and the 2016 Olympics.

“The system for granting the concessions has not been the best, but it was pragmatic,” said Marco Antonio Bologna, the chief executive of TAM Airlines, part of the Latam Airlines Group SA (LFL, LAN.SN).

Brazil has awarded airport concessions recently to the highest bidder. Mr. Bologna says that doesn’t guarantee the operator will be the most efficient. “We need still need to strengthen oversight over the contractors and operators,” Mr. Bologna added. “We hope to see big improvements in infrastructure next year,” he added.

Link to Original Article:

From Wall Street Journal

Latin America Investment News on Viva Tropical