Tuesday, February 7, 2023

New airline alliances to prepare for cost control and face 2023

Financial Newspaper – Santiago

Airlines want to put behind the effects of the pandemic on their operations and 2023 appears to be crucial towards this goal. This is why companies adjust parts in a competitive market.

During the past year, the National Economic Prosecutor’s Office (FNE) approved two major agreements: LATAM Airlines-Delta and JetSmart-American Airlines, strategic alliances that will increase pressure in Chile and Latin America. And while Sky’s rivals are in full swing of their partnerships, Holger Pohlmann’s air arm is on its own accelerating the aim of expanding its presence on routes between South America and the United States.

At the same time, three of Chile’s largest companies have set their eyes on strengthening ties with North America amid a scenario of rising costs, changing demand and rising flight ticket rates.

The report made by FNE on the joint venture between LATAM and American gives some indication of why this is the airlines’ bet. The prosecutor’s office said that national consumers have a “clear preference” for routes between Chile and North America. In fact, for 2017, 2018 and 2019, more than 70% of the total available itineraries correspond to non-stop flights, highlighting routes connecting Santiago with the cities of Miami, New York, Dallas, Atlanta, Houston, Toronto, does. and Los Angeles.

Leading the market share in 2019 was LATAM Airlines with 32.3% of flights between Chile and the US; Following that is American with 25%, then Delta with 12% and United with 11.5%. The rest of the offers are Copa, Avianca, Aeromexico and Air Canada. At that time Sky and JetSmart were not reaching that market.

In this sense, Victor Mejia, Jetsmart’s commercial director, said that “the approval of our code share agreement with American Airlines will allow us to offer a large network of routes between the United States and South America with low fares. ” Travel Loyalty Program within the US”.

how is 2023 coming

During the first quarter of the year, LATAM and Delta are working on the implementation of their agreement. Andreas Shack, vice president of LATAM sales, said before Jetsmart’s agreement with American that “any alliance that improves competition is always welcome as it improves prices and products for customers.”

Against this backdrop, he said that in terms of their agreement, the first steps would focus on improving the customer experience between the two companies. Such as, for example, “ensuring faster connections, combined accumulation of miles in frequent flyer programs and new routes between the two regions, among others.”

In the case of JetSmart, the airline is still keeping a low profile. And it is that in order to force their agreement, it is a vital element to obtain ratification throughout Latin America.

Sky is the only airline competing without a strategic alliance. The condition is a gradual increase towards the United States to the extent that demand increases. Its fleet of state-of-the-art aircraft will be important as they allow for greater cost control.

“We believe that 2023 will be a difficult year for the industry due to the economic context of the country, which will not only impact the cost side, but we also envision a possible contraction in demand. This forces us to be increasingly efficient as we continue to deliver value to our customers through more routes, more frequencies and prices,” said Carmen Gloria Serrat, Commercial Director, Sky.

With regard to cost increases for 2023, Andreas Shack expressed that 45% of them are for fuel. However, he stressed that the Chilean and Latin American market is “highly competitive”, a factor that will allow ticket prices to balance.

Meanwhile, Victor Mejia said that “fluctuations in inflation will also affect demand and we expect that 2023 will be the year of full reactivation for the aviation sector, despite the macroeconomic forecast.”

So far, we still haven’t seen the same level of flights as in a normal year, but summer is in its early stages. According to Serrat, Chilean skies will transfer 1,135,367 passengers this first quarter of the year, which is 191% higher than the same period in 2021, but still down 5% from 2019.

A similar situation is anticipated by Andreas Shack, LATAM’s sales director, who said the group’s operations would be about 85% operational by January. This month, the domestic markets of Brazil, Colombia, Ecuador and Peru surpassed the level of the same period in 2019, but Chile still has not reached the previous years.

Nation World News Desk
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