Discount carriers taking off in South America

U.S. ultralow-cost carriers (ULCCs) aren’t the only ones in
growth mode.

In fact, in South America over the past few years, Chile,
Argentina and Peru have seen an explosion of domestic ULCC service after long
lagging behind much of the rest of the world. 

“You have to think of these low-cost carriers as
providing essential infrastructure,” said Carlos Ozores, Latin American
aviation analyst for the consultancy ICF. “They don’t have great roads and
trains. Having the airline capacity supports economic development; the economic
development supports outbound travel.”

In Chile, Sky Airline, the country’s second-largest carrier
behind Latam, transitioned to a low-cost model in 2015. It serves 13 domestic
destinations. Sky was joined in the Chilean discount market in 2017 by ULCC
startup JetSmart, which now also now serves 13 cities there.

Success in Chile facilitated JetSmart’s April move into
Argentina, where it offers domestic service. The carrier planned a total of 12
intra-Argentina launches between April and June serving eight cities. 

Competition, though, could be fierce. Start-up carrier
Flybondi became the first Argentinian ULCC in January 2018, and it now serves
15 cities and more than 45 routes in a network that is almost entirely
domestic. The third discount Argentina operator is Norwegian Air, which entered
the market last October and now operates a seven-city domestic route network. 

The story is similar in Peru, where Viva Air Peru launched
service as the nation’s first domestic ULCC in 2017. The carrier now flies
eight domestic routes from the capital of Lima. Viva is no longer alone in the
Peruvian market, however. In April, Sky made its domestic entrance to the
country with the launch of seven routes from Lima. 

Ozores said he doesn’t expect these new ULCC entrants to
launch U.S. service in the near future, although it could make sense for them
to focus on the family travel market to Florida eventually. Still, he said,
U.S.-based travelers can benefit from these new carriers as they drive prices
down within the Latin America market. For example, both Viva and Sky are flying
Lima-Cusco, which is good news for Machu Picchu visitors. 

The carriers are also increasing competition on international
South American flights. Ozores said he has noticed significant price decreases
from Latam on Lima to Santiago, Chile, due to competition from Sky and
JetSmart.

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