Air Transport: New Market Settings

Restructuring of airlines, preference for direct flights, modifications in the routes operated and the use of smaller aircraft are some of the changes expected in the regional air market in the context of the new business normality.

Monday, June 15, 2020

Air traffic has virtually disappeared in the last three months, as governments in Central America have decided to close borders and suspend commercial flights to and from the region's airports as a result of the covid-19 outbreak.

Check out the "System for monitoring markets and economic situation in Central American countries", developed by CentralAmericaData.

Airlines are already suffering the effects of severe government quarantines. An example of this is the situation of Avianca, an airline of Colombian origin, which at the beginning of May voluntarily filed for bankruptcy in the United States, as a result of the economic losses the company has reported due to the spread of covid-19 at a global level.

Companies should accommodate, as far as possible, the offer of their services according to the new consumer preferences in this commercial reality.

Enrique Perez Fiano, an air transport specialist, told Prensalibre.com that "... hubs are going to be very affected, since travelers will prefer direct routes to avoid those large concentrations of people that a hub receives, but this is an issue that will have to be sustained since it is difficult to have direct flights to all countries."

According to Perez, in this context of business transformation, the companies that are most vulnerable are the low-cost ones but they are also more flexible in reducing their fleets as in reducing their staff.

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Motty Rodas, executive director of the Guatemalan Airline Association (Agla), explained that "... there is also discussion that smaller planes could be used to be profitable. For example, if a 150-passenger plane is only in demand for half the return, it is not profitable. It should also be remembered that as part of the sector's protocol, space will be left between seats for physical distancing, and that also generates costs."

Rhodes believes it is unlikely that the hubs located in Central America will be closed, meaning that Copa Airlines' hub in Panama and Avianca's hub in El Salvador would have to remain in place.

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Welcome Competition and Low Prices

November 2016

In five years the airline market in Central America has transformed from being a market dominated by two major airlines, to one with new entrants, lower prices and greater connectivity.

The arrival of so called "low cost" airlines to the region has resulted in a progressive reduction in the prices of tickets to fly between Central American countries. Between 2011 and 2014 the average cost without taxes for travelling between Costa Rica and El Salvador ranged from between $400 and $500, while in 2015 it costs $391.

Direct Flight between Panama and Denver

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Starting December 3rd United Airlines will have direct flights between Tocumen Airport and Denver airport in the USA.

From a statement issued by the Government of Panama:

The official announcement took place at the Marriott hotel in Panama City, where the CEO of United, Freddy Rodríguez said: "This initiative is very important because with it we are taking on challenges with this new destination, related to having a global reach and providing good service for our customers. "

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