For United Continental, the Latin American market — an area that stretches from Brazil’s growing economy in South America to Mexico’s precarious Saltillo region — is sizzling with new business.
"It’s a market that’s been underserved,’’ Tom Parsons, chief executive officer of BestFares.com, said of the robust growth. "Now, it’s just a huge revenue market.’’
The U.S. airline industry continues to struggle with rising fuel prices and battered profits.
While the major fliers are navigating the business turbulence by managing capacity — essentially limiting the supply of seats and the number of flights so they’re able to sell as many tickets as possible at premium prices — the market in Latin America is different.
South America, which has been known for its own periods of economic and political volatility, isn’t experiencing the sort of trouble currently rippling through Europe.
For United Continental, it’s all adding up to big business. In its latest earnings report, the airline said its revenues from flights to the market, which also includes the Caribbean, soared 22 percent over last year.
While the dramatic jump in revenue from Latin American business is partly a result of Continental’s merger with United last year, it is boosted by the economic growth in parts of South America, namely Brazil and Argentina, and limited competition from other airlines serving the market.
Mexico, which recently lost a major airline to bankruptcy, is also contributing to United Continental’s growing revenues in Latin America.
Five years ago, the airline was counting on a tailwind coming from another part of the world.
With Newark Liberty International Airport as its gateway, Continental targeted Europe and quickly captured critical marketshare by adding dozens of new flights to Ireland, Spain and France. These days, however, that growth has been slowed by economic troubles in Europe and the U.S.
Michael Boyd, an airline industry consultant from Denver, said United Continental target on Latin America is well-placed.
"They have a good grasp of where the future (growth) is,’’ Boyd said.
Brian Znotins, United Continental’s managing director of international planning, said while leisure travel is driving a big part of the airline’s increasing sales in Latin America, business fliers are also a critical part of the equation.
There may be more tourists and ethnic Americans flying back and forth, but business fliers represent the most lucrative component of the flying marketshare.
According to Parsons of BestFares.com, business travelers are paying between $4,000 and $6,000 to fly into cities like Buenos Aires. For leisure travelers, fares to South American can be as much as $1,200, roughly twice as much as popular Europeon destinations, he said.
The prospects for business in Brazil are so bright, Parsons dubs South America the "new China.’’ Like parts of China, South America isn’t only a business hotspot, it also has an expanding, money-spending middle class.
While Znotins won’t identify specific clients, he said business travelers to South America are largely from the pharmaceutical, energy, automotive and consulting industries. In Mexico, the airline has experienced a blip in business travelers from Houston to the Saltillo region, a hub of automobile manufacturing.
"Given the concerns with violence, someone who used to drive 100 miles from Monterrey to Saltillo,’’ Znotins said, "is more likely to fly.’’
Parsons, who advocates on behalf of travelers, said there’s another reason United Continental is capturing so much of the flying business in South America: the company’s has few competitors.
The popular U.S. discount carriers, such as JetBlue or Frontier, he said, don’t pose any competition although a couple of major carriers, namely American Airlines and Delta, do fly into the market.
In South America, Chile-based LAN Airline, which flies into Miami, may be the most formidible Latin American carriers, according to Parsons. In Mexico, the 2010 banktruptcy of Mexicana Airline also created an opportunity for United Continental to add service to Mexico.
Znotins said since the bankruptcy of Mexicana, United Continental has added daily flights between Los Angeles and several cities in Mexico – Durango, Leon and Guadalajara.
Bijan Vasigh, managing director of the Florida-based Aviation Consulting Group, agreed that a lack of competition allows United Continental to command premium prices in areas such as Northern Mexico and South America, where demand for air travel is booming.
It was part of Continental’s reason for acquiring United, he said."Most of the recent airline mergers,’’ Vasigh said, "have been driven by an interest in buying the competition.’’
nj.com
"It’s a market that’s been underserved,’’ Tom Parsons, chief executive officer of BestFares.com, said of the robust growth. "Now, it’s just a huge revenue market.’’
The U.S. airline industry continues to struggle with rising fuel prices and battered profits.
While the major fliers are navigating the business turbulence by managing capacity — essentially limiting the supply of seats and the number of flights so they’re able to sell as many tickets as possible at premium prices — the market in Latin America is different.
South America, which has been known for its own periods of economic and political volatility, isn’t experiencing the sort of trouble currently rippling through Europe.
For United Continental, it’s all adding up to big business. In its latest earnings report, the airline said its revenues from flights to the market, which also includes the Caribbean, soared 22 percent over last year.
While the dramatic jump in revenue from Latin American business is partly a result of Continental’s merger with United last year, it is boosted by the economic growth in parts of South America, namely Brazil and Argentina, and limited competition from other airlines serving the market.
Mexico, which recently lost a major airline to bankruptcy, is also contributing to United Continental’s growing revenues in Latin America.
Five years ago, the airline was counting on a tailwind coming from another part of the world.
With Newark Liberty International Airport as its gateway, Continental targeted Europe and quickly captured critical marketshare by adding dozens of new flights to Ireland, Spain and France. These days, however, that growth has been slowed by economic troubles in Europe and the U.S.
Michael Boyd, an airline industry consultant from Denver, said United Continental target on Latin America is well-placed.
"They have a good grasp of where the future (growth) is,’’ Boyd said.
Brian Znotins, United Continental’s managing director of international planning, said while leisure travel is driving a big part of the airline’s increasing sales in Latin America, business fliers are also a critical part of the equation.
There may be more tourists and ethnic Americans flying back and forth, but business fliers represent the most lucrative component of the flying marketshare.
According to Parsons of BestFares.com, business travelers are paying between $4,000 and $6,000 to fly into cities like Buenos Aires. For leisure travelers, fares to South American can be as much as $1,200, roughly twice as much as popular Europeon destinations, he said.
The prospects for business in Brazil are so bright, Parsons dubs South America the "new China.’’ Like parts of China, South America isn’t only a business hotspot, it also has an expanding, money-spending middle class.
While Znotins won’t identify specific clients, he said business travelers to South America are largely from the pharmaceutical, energy, automotive and consulting industries. In Mexico, the airline has experienced a blip in business travelers from Houston to the Saltillo region, a hub of automobile manufacturing.
"Given the concerns with violence, someone who used to drive 100 miles from Monterrey to Saltillo,’’ Znotins said, "is more likely to fly.’’
Parsons, who advocates on behalf of travelers, said there’s another reason United Continental is capturing so much of the flying business in South America: the company’s has few competitors.
The popular U.S. discount carriers, such as JetBlue or Frontier, he said, don’t pose any competition although a couple of major carriers, namely American Airlines and Delta, do fly into the market.
In South America, Chile-based LAN Airline, which flies into Miami, may be the most formidible Latin American carriers, according to Parsons. In Mexico, the 2010 banktruptcy of Mexicana Airline also created an opportunity for United Continental to add service to Mexico.
Znotins said since the bankruptcy of Mexicana, United Continental has added daily flights between Los Angeles and several cities in Mexico – Durango, Leon and Guadalajara.
Bijan Vasigh, managing director of the Florida-based Aviation Consulting Group, agreed that a lack of competition allows United Continental to command premium prices in areas such as Northern Mexico and South America, where demand for air travel is booming.
It was part of Continental’s reason for acquiring United, he said."Most of the recent airline mergers,’’ Vasigh said, "have been driven by an interest in buying the competition.’’
nj.com
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