Frederik Jacobsen: The Low-Cost Carrier Model Is Here to Stay in Latin America but Governments Need to Think Bigger About Aviation

With almost 40 years in the airline industry, Frederik Jacobsen still isn’t done working to make a mark. Having served stints with cargo airline Tampa Air (now part of Avianca), Lufthansa, and co-founding pioneering low-cost carrier Viva, Jacobsen isn’t ready to call it quits.

Over coffee, he and Finance Colombia Executive Editor Loren Moss discussed Colombia’s rapidly changing commercial aviation landscape, the future for the low-cost airline model, and whether Jacobsen has any plans to slow down after all he has accomplished.

Photo: Frederik Jacobsen

Loren Moss: We are at a time in the industry where  we are going through many changes very rapidly. Especially in Colombia, we had the two low-cost carriers that disappeared within a month of each other. Prices have skyrocketed. Still, the demand is up, especially internationally. But now we also have a situation: we’ve got other carriers coming into the Colombian market, including JetSmart and Arajet. In a post-covid environment, has the Colombian aviation market turned out the way that you could have even imagined?

Frederik Jacobsen: I think we are seeing this in many markets around the world. Aviation recovered rather quickly. I remember sitting in 2021, scratching our heads with many colleagues, wondering when is this going to recover, and I am amazed how quickly aviation was able to get back.

I think it also had to do with the pandemic and how people rethought their lives and wanted to be closer to friends and family. They wanted to travel the world. We are seeing record numbers of passengers, and the airlines are doing very well in terms of financials overall.

I think Colombia was one of the countries that recovered quickly, even in the domestic market. I’m always amazed at the resilience of aviation. I’ve lived in my career through 9/11 and many other very, very big crises, and it’s always amazing how the aviation industry comes together to restart and rethink how to be successful in the business.

Loren Moss: In Colombia, our two low-cost carriers that were founded here have left the market. Is the low-cost model here to stay in Colombia? Is air travel now going to be a mass-market thing like it is in the US? Or is this a threat to the low-cost model for Colombia and other countries in the Americas?

The future is very bright for Latin America, but we need the governments to understand how important it is and to work together to build the environment that will bring this capital, which is essential to developing aviation.

– Frederik Jacobsen

Frederik Jacobsen: In my view, the low-cost model is here to stay in Latin America overall. I think the demise of Viva and Ultra have nothing to do particularly with the model — but the circumstances. Because even if you look, the legacy model was also in trouble. I mean, how many airlines would have failed were it not for the governments that helped them? Three of the major airlines in Latin America — Aeromexico, Avianca, and LATAM — filed for Chapter 11.

So the failure of Viva and Ultra is not the model, it was more the circumstances. And Latin America needs low-cost airlines. Because air transportation is a public service, and Latin Americans need to travel, it’s a very vast continent separated by jungles and mountains with very poor road systems still. Aviation is fundamental for the development of Latin America, and the only way to get those people on board is by offering low fairs.

Loren Moss: Do Latin American carriers still suffer from a lack of access to capital? Or have the institutions and capital markets now kind of taken notice and said look, “we are willing to invest, we are not going to treat you like some backwater, but we see that you have sophisticated business talent that can operate these airlines”?

Frederik Jacobsen: I think the lack of access to capital is still there, and it will continue. Unfortunately, I think, for Latin America to really take off in aviation and air transportation there has to be a major shift in how governments view aviation. 

I think having lived in the US, and gone to college in the US, you really appreciate how forward-looking the US was80 years ago when they started to develop their railroad system, the highway system, and then the aviation system. They understood that transportation was essential for development.

We don’t have this in Latin America. The governments continue to think that aviation is for the rich, and they tax aviation heavily. They don’t develop the infrastructure, they don’t create conditions that make aviation very competitive. And as a result, it is difficult for investors to look at the region with promise.

The future is very bright for Latin America, but we need the governments to understand how important it is and to work together to build the environment that will bring this capital, which is essential to developing aviation. It’s a capital-intensive business, and if you don’t have access to capital, it’s gonna be very difficult. This is one of the things that everybody involved in aviation needs to work very hard on.

I know, because I’ve been involved with ALTA, IATA, I know they are trying to do their best; but we have in Latin America a big problem, because even though we call ourselves brothers — and we are brother countries — we are very far apart. You go from Colombia to Ecuador, or you go into Central America, and each government is on its own.

They don’t develop common laws. They don’t make it easy for people to do business. And, as a result, it’s a very segregated continent. It makes it very difficult to invite really big investments into the region.

Loren: Here in Bogota, El Dorado is full. That’s part of the problem — there are not enough slots. Not only that, the air congestion. Now they are talking about Bogotá needing another airport. In Medellín, they are already talking about perhaps they need to add a second runway. In Cartagena, that airport 10 years ago was newly renovated, and now it’s full. When you talk about the government’s role, what challenge does the country’s infrastructure present? 

Frederik Jacobsen: It’s not only the airports, but it’s the roads that lead to the airports. It needs rethinking. It’s creating like a master plan for aviation in Colombia. Because you, for example, argue and you’ve heard about the airport in Manizales. It’s a crazy idea. It costs too much money. 

“The low-cost model is here to stay in Latin America overall. I think the demise of Viva and Ultra have nothing to do particularly with the model — but the circumstances.”

– Frederik Jacobsen

Loren: And there’s a volcano sitting over it!

Frederik Jacobsen: When you can build a great airport in Cartago that will serve Pereira, Manizales, and Armenia and connect them. You can also have a very huge airport on the northern coast of Colombia — maybe in Barranquilla or maybe between Barranquilla and Cartagena.

But we are always thinking very small. Every small city wants to have an airport, and airports cost money. There are very isolated places in Colombia that have very poor airports, but you can develop. You can rebuild the seaplane businesses — that’s how aviation in Colombia started, through the Magdalena river and many others.

I always have believed that in Latin America, we think very small. We don’t have big ideas. And we have government officials who are politicians, and they don’t understand air transportation.

But they don’t focus on bringing the experts to develop a great master plan. So we are always developing small things, and thinking small, and I think that’s one of the major problems that we have.

Loren Moss: You are obviously not ready to quit. You’ve been at this for 40 years! What’s next for Mr. Jacobsen? What’s next on your plate?

Frederik Jacobsen: I look forward to continuing. I think more, at this stage, of kind of giving back. I think I’ve had a wonderful professional career. I’ve learned a lot. I’ve gained a lot of experience. I want to give back. I want to continue working in ways to support aviation.

I may get involved in projects outside of aviation that are also very promising, but I hope to continue contributing to the industry. And I surely want to continue staying very busy in the next 20 years. That’s my plan right now.