Being in the tourism and residential tourism industry we are greatly concerned about the airlines possibly cutting back flights as they have done in the U.S. and the Caribbean. Just as Panama is starting to see an increase in the number of flights from various parts of the world, higher fuel costs could throw a wrench in the gears of growth. The Latin Business Chronicle carries an article with the opinions of three experts in the Latin America airline industry and their views are rather optimistic, basing their opinions mostly on inter-country travel within the Americas. How will the higher fares and lower purchasing power affect visitors from the developed countries?
Bobby Booth, Chairman of the Board of Aviation Management Services: First of all, it is the region with the highest yields (fares) for both US majors and airlines in the region. The economies are healthy and growing which creates demand for air transportation, historically at about twice the growth rate of GDP, which means double-digit growth in demand. The Latin American ‘model airlines’—Copa, LAN, TAM, and Gol (without Varig)—are all profitable and reporting significant growth so far this year. They also have fleets of next-generation aircraft, which helps them to reduce consumption and maintenance costs.
Jerry Haar, Associate Dean and Professor in the College of Business Administration at Florida International University:Companies like Embraer and Bombardier, specializing in regional jet manufacturing, will yield huge dividends for these firms as airlines are being forced to utilize smaller and more fuel-efficient planes for less than long-distance hauls (the Embraer RJ145 is used on flights from Dulles Airport to Detroit, not the Boeing 777).
Tapen Sinha, ING Comercial America Chair;There are two elements that are different from the airlines in the US. First, many airlines in the region are government-owned. Thus, they have deeper pockets. Short-term losses do not amount to much. Second, governments of countries such as Venezuela, Brazil, and Mexico also benefit from high oil prices. They can provide direct and indirect subsidies to the airlines they own.
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