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Latin America will need more aircraft to meet middle class demand

By Hpanchal on November 18, 2013

Latin American airlines will require 2,307 new aircraft between 2013 and 2032, according to Airbus’ latest Global Market Forecast.

This includes 1,794 single-aisle, 475 twin-aisle and 38 very large aircraft worth an estimated US$292 billion (216.7 billion euros). Globally, by 2032 some 29,230 new freighter and passenger aircraft will be required to satisfy future robust market demand.

With GDP growing above the world average, socioeconomic indicators forecast that Latin America’s middle class will grow to represent more than half of the population by 2032. Between 2012 and 2020, Latin America’s economy is expected to outperform the world average, largely thanks to Mexico and Brazil’s consumer spending.

As a result, traffic growth in Latin America in the next 20 years is expected to outperform the world average of 4.7 percent with an annual growth rate of 5.2 percent.

A growing middle class and increased consumer spending have led to air transport becoming more accessible throughout Latin America in the past 10 years, increasing 14 percent in terms of total number of cities served. Still, while almost 100 percent of the 20 largest cities in North America and Europe connect passengers with at least one flight per day, only 40 percent of Latin America’s top 20 cities do the same.

As a result, in the next 20 years, intra-regional and domestic traffic is expected to grow at a rate of 6.3 percent.

“Very large aircraft, such as the A380, not only help alleviate traffic congestion at busy airports, but they can assist Latin American airlines to compete with their foreign competitors,” said Rafael Alonso, executive vice president of Airbus for Latin America and the Caribbean. “At the same time, the A380 addresses international air traffic requirements needed to serve long-haul flights to Europe.”

Another prevalent trend in Latin America is the rise of low-cost carriers, which accounts for nearly 40 percent of the market share of total air traffic in the region, up from just 12 percent in 2003, with Mexico and Brazil representing nearly the entire market.

While many Latin American airlines have maintained a young fleet, the average aircraft age in Latin America could decrease further when Caribbean carriers start their renewal process.

“Aircraft in the Caribbean average about 17 years of age. That’s more than seven years older than the Latin America and world average,” Alonso said. “We’ve already started seeing some airlines in the Caribbean take advantage of current market opportunities and achieve greater operational benefits associated to newer generation aircraft. As more follow, the average aircraft age in the region will continue to drop.”