Uruguay , Argentina , Mexico , Puerto Rico and Colombia

Economic slowdown, inflation the main threats to recovery in LatAm air traffic

Bnamericas Published: Wednesday, October 12, 2022
Economic slowdown, inflation the main threats to recovery in LatAm air traffic

Long-term inflation and slowing economic growth deceleration are the main obstacles to the full recovery of air traffic across Latin America, following the lifting of most restrictions introduced during the COVID-19 pandemic, according to a Moody’s analyst. 

“Aside from inflationary pressures, the economic slowdown could affect air traffic, mainly business trips in regions with high passenger traffic in this segment,” Diego González, assistant VP for project finance & infrastructure at Moody’s Investors Service, told BNamericas. 

Moody’s latest report on airports for Latin America and the Caribbean estimates that air traffic will return to pre-pandemic levels next year, with the exceptions of Uruguay and Argentina, which only lifted most travel restrictions in November 2021.

González adds that these countries’ airports cater more to passengers within Latin America rather than travelers from other regions and are therefore unlikely to catch up with 2019 figures until 2024. 

“Moderate demographic and economic growth in the region limits the speed of [air passenger] traffic recovery  [in Uruguay and Argentina] compared with other airports in Latin America,” he says.

On the other hand, surging jet fuel prices are likely to translate into higher ticket prices for fliers, which will also be a challenge for the recovery, according to the report. 

As of the first half of 2022, only three operators rated by Moody’s, Mexico’s GAP, Puerto Rico’s Aerostar and Colombia’s Opain, saw higher passenger traffic than in the same period of 2019, as they receive more passengers from Europe and the US for leisure travel. 

By contrast, passenger traffic at Montevideo’s Carrasco airport only reached 58% of pre-pandemic levels in 1H22. 

In general terms, Moody’s outlook for airport operators is stable across the region, which will be reflected in strengthened financial metrics, according to González.

However, infrastructure expansions in the sector will not be a priority in the medium term, as most operators have already completed the upgrades required in their contracts, with the exception of Argentina’s AA2000, which is currently building a new US$26mn terminal at Buenos Aires’ main airport, Ezeiza.

“As the gradual recovery of traffic to pre-pandemic levels continues, airport capex needs and requirements will be updated,” González said. 

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