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Latin American Aviation Takes Off, with Caution

Even as safety concerns persist, the region's industry grows. (AP Images)

April 04, 2008

Aviation safety concerns are not foreign to Latin America. The region improved its commercial airline safety record last year, but continues to lag behind the rest of the world. Still, investors and plane manufacturers anticipate a sustained growth in the domestic and international markets as regional airlines modernize their fleets and expand coverage.

Latin America’s airline safety record improved last year, dropping to one accident per 600,000 flights, compared to one per 400,000 just two years earlier. Yet, the region’s accident rate remains roughly double the global average, according to the International Air Transport Association’s (IATA) President Giovanni Bisignani. During an April 1 conference in Chile, he outlined technology and regulations that can help boost aviation safety in the region. He also highlighted Brazil and Panama’s intentions to adopt IATA’s Operational Safety Audit (Chile, Costa Rica, and Mexico implemented the program).

Concern about aviation safety in Brazil captured media attention last year following a deadly crash at the São Paulo airport on a runway condemned as too short. Over the past two years, Brazil experienced disastrous accidents resulting in 353 total fatalities. Brazilian airports experienced chaotic delays, and were plagued by labor and union strikes, inadequate regulations, the use of outdated equipment, and congestion exacerbated by a booming economy. In late March 2008, families of crash victims staged three simultaneous demonstrations in Brazilian airports to protest the delays and lack of transparency of investigations into the accidents. 

Overall, Latin America suffers from a lack of the necessary technology to handle increasing number of domestic and international travelers. For example, only seven of 22 Latin American airlines use barcodes on their boarding passes while extensive paperwork for shipping cargo harms efficiency, according to IATA. Bisignani also blasted governments who “use infrastructure as a cash cow,” to increase costs. In particular, he pointed to Brazil’s controversial congestion surcharge, Ecuador’s tax to pay for a new airport, and Bolivia’s tourism tax. Bogota’s plans to demolish El Dorado airport to make way for a new airport with upgraded radars, but the concession contract is coupled with a 46 percent royalty tax.

Despite concerns about deficiencies in safety and technology, commercial air travel in the region shows promising signs of growth. In 2007, Latin America saw an 8.4 percent rise in passenger demand of 8.4 percent, the world’s second highest behind only to the Middle East. Last week, JetBlue’s founder David Neeleman announced  the creation of a new low-cost airline in Brazil. He estimates that the Brazilian market should grow three or four times larger to roughly 50 million passengers annually. Regional carrier Avianca acquired 67 planes worth $7 billion to replace their fleet by 2012. The airline increased the number of domestic and international flights by nearly 25 percent last year. American Airlines also recorded higher revenue from the region, offsetting lower profits in the United States and Pacific region, according to the Latin Business Chronicle.

Aircraft manufacturers have felt the effects of rising Latin American demand for commercial plans as well. Airbus announced sold 192 new planes since Jan 2007 and has 300 backlogged orders for the region. Meanwhile, Boeing sold 90 planes in 2007, up from 61 the previous year. The manufacturer forecasts that, over the next two decades, aircraft sales to Latin American airplane sales should reach $120 billion, well above the world average and second only to China.