Is there light on the horizon for air travel?

Last year has been dubbed the worst year in history for air travel demand by international aviation association AITA, as the COVID-19 pandemic has forced most nations to restrict travel and even close borders.

Latin America has been no exception to this phenomenon and air passenger traffic dived 71.8% last year compared with 2019, with both airlines and airport operators facing serious financial hardships as a result.

But Colombia-based low-cost airline Viva Air now sees an opportunity in the market, despite an upswing in active COVID-19 cases in some parts of the region and global concerns about inflation.

BNamericas spoke with the company's CFO, Jason Bewley, about the current state of low-cost air travel in Latin America, the outlook for the sector and how the industry could benefit from airport development plans.

BNamericas: What's the current state of Latin America's low-cost airline sector now we’re two nearly years into the pandemic?

Bewley: Today LCCs [low-cost carriers] in Latin America are mostly back to pre-pandemic levels. If you look at the fourth quarter of 2019 versus estimates for the fourth quarter of 2021, LCCs are pretty much larger than they were two years ago.

That’s not necessarily the same around the world. Some LCCs are still struggling to get back to where they were before in different regions. But in Latin America, most LCCs are bigger than they were two years ago, and in the case of Viva Air in Colombia we’re 50% larger today than in 2019.

BNamericas: But isn’t there now less competition given how many airlines struggled to stay afloat during the pandemic?

Bewley: There have been a number of restructurings in a few airlines, and the ones that went out of business aren’t direct competitors of ours.

Some airlines filed for Chapter 11, while at Viva Air we restructured. I would say the competition we have now is the same as before the pandemic, but some may be smaller.

BNamericas: Which countries in Latin America are the most attractive for Viva Air now?

Bewley: If you look at the equator line, the majority of Latin America’s GDP is south of that line. And therefore, that’s what looks attractive to us.

Most recently we’ve talked about Chile, Argentina, Ecuador and certainly Brazil. It shouldn’t be surprising to start flights there in the next two years.

We fly between Colombia and Peru today, therefore passing over Ecuador, so it should make a lot of sense to start operating there as well. 

BNamericas: Before the pandemic, some countries were looking to adapt smaller airports to better receive low-cost airlines. Would you like to see these plans return after the pandemic or you believe that the current terminals should expand in order to accommodate low-cost airlines?

Bewley: Both. We’d always like to access mayor existing airports that have good connections.

I’m not particularly familiar with those pre-pandemic plans, but if there are plans to open alternative airports for LCCs, we’d have questions about their locations, populations and, most importantly, if they’re going to serve only domestic flights or international ones, because our interest in Viva Air is to serve international flights.  

The truth is that, for any airline in the world, the more access the better.

BNamericas: Can it really be said that there’s a rebound for the LCC sector as COVID-19 cases are on the rise in some countries and inflation is becoming a major concern?

Bewley: It’s true that COVID-19 hasn’t fully gone away, but the world is in a completely different spot than it was a year ago. We have vaccines now and we’re seeing good progress in countries like Colombia and Peru to get those vaccines distributed.

I think people are getting more confident that the end of COVID is hopefully near.

Inflation does play a role as well. Fuel prices are up significantly from 12 months ago, and it will affect people’s decisions on discretionary expenses.

But a lot of people haven’t been able to travel for 18 months due to fears of COVID or border restrictions and now there’s huge pent-up demand. We’re seeing that in the US and Colombia – people just want to travel.

It may be more expensive due to fuel, but we’re doing everything on our side to keep our non-fuel costs as low as possible in order to upset some of that.

BNamericas: How does Viva Air plan to capitalize on the pent-up demand you mention?

Bewley: Opening new routes. Three years ago, we only had three international routes between Colombia, Peru and Miami. Now we have seven, we added Mexico City, Cancún and Orlando.

We also have new aircraft coming next year, and with that we have a fairly well-connected network here in Colombia, where we expect some growth as well, but a lot of our growth will be internationally. 

We see Viva Air very well positioned in terms of geography, as Colombia is basically between the two main parts of the Americas.