Long-Term Market
Stability fosters economic growth
The Latin America region's increasing political stability creates a favorable context for economic growth. Regional economies have weathered the 2008-09 financial crises well. Their recovery has been faster than in other regions of the world, including Organisation for Economic Co-operation and Development (OECD) economies. Within the region, South America has outperformed Central America, Mexico, and the Caribbean. The global economy continues to be the main source of uncertainty for Latin America and the Caribbean. Although inflation remains a concern, the region is forecast to enjoy a growth rate of 3.6 percent, well above the world average of 2.6 percent.
International and domestic aviation on the upswing
The natural barriers of the Andes Mountains and the Amazon rainforests present formidable obstacles to rail and road development. The region therefore relies heavily on aviation for domestic transport. Airspace, airport, and ground infrastructure are all struggling to keep pace with growing aviation demand. The anticipated increase in international traffic from the 2014 World Cup and the 2016 Olympics in Brazil highlight the need for investment. The greatest opportunity for growth is within the region. For example, air travel is beginning to overtake bus travel in Mexico and Brazil. In 2011, the number of domestic air travelers in Brazil rose above the number of bus passengers for the first time, as 8.7 million passengers took their first commercial airplane flight. Regional growth has spurred the rise of low-cost carriers (LCC) such as Viva, Interjet, Azul, and Volaris. As LCCs drive growth and stimulate demand, they are entering partnerships to extend their reach globally.
The dynamic nature of Latin American aviation has produced a healthier, more competitive marketplace and encouraged new airline business models. The region's largest airlines have led the way with mergers, including Avianca/TACA, TRIP/Azul, and LAN/TAM, that streamline networks and introduce new efficiencies. Well run and profitable, with access to capital, the top carriers in the region can compete with any airline in the world.
Regional fleet expanding strongly
The installed fleet is expected to grow 5.1 percent annually to comprise 3,450 airplanes, including 2,510 new deliveries valued at $260 billion. Most of these will be single-aisle airplanes, spurred by intense regional traffic growth. The twin-aisle fleet will expand to 340 airplanes as regional carriers compete more strongly on routes traditionally dominated by foreign operators.
