The Latin American air freight market, valued at $1.04 billion USD in 2025, is projected to experience sustained growth, driven by expanding e-commerce, increasing cross-border trade, including inter-Latin American trade. Key growth drivers include the rising demand for more reliable and quick turnaround delivery services, particularly for perishable goods and high-value products.

Global air cargo demand rose by 3.4% in 2025 compared with the previous year, according to data released by the International Air Transport Association (IATA).

At the same time, total capacity, measured in available cargo ton-kilometers (ACTK), increased by 3.7% year on year. For international operations, demand rose by 4.2%, while capacity increased by 5.1%.

Latin America Air Freight Industry Concentration & Characteristics

The Latin American air freight industry has been defined by a moderate level of concentration, with a few large global players dominating but now also including several significant regional carriers. While FedEx, UPS, and DHL hold substantial market share, particularly in international freight, regional players like LATAM Cargo, Avianca Cargo (Tampa Air), and Aeromexico maintain strong positions in domestic and regional routes.

Other leading players in the Latin American airfreight industry include IAG Cargo (UK), Copa Airlines (Panama), American Airlines, Delta Airlines, Azul Cargo Express (Brazil) and Emirates Skycargo.

Nicholas Sutherland’s opinions and claims are his own, and not necessarily those of Finance Colombia.

Regional Growth Drivers

• E-commerce explosion – Same-day and next-day service expectations are migrating south, driving express integrators to expand cargo terminals in Latin America and sign block-space agreements with regional carriers.
• Perishables dominance – Colombia, Ecuador, Peru, and Chile collectively ship more than 1.5 million tons of flowers, fruit, seafood, and pharma each year—commodities that depend on airport infrastructure for freight with reliable 2-8 °C corridors.
• Pharmaceuticals – Colombia, Mexico and Brazil stand out as not only having large national companies, but also some of the largest pharma companies in the world have factories in these countries.

Electronics, jewelry, auto parts, specialized machine parts, and high-value textiles are also driving increased traffic.

Latin America’s Hub Status

For years, Latin America has been spoken of primarily as a supplier, a hub for perishables, electronics, and auto parts feeding the U.S. and Europe. Fast forward to 2025 and something is unmistakably clear: the region is no longer merely sourcing for the world. It is becoming one of the most strategically viable air cargo growth engines, driven by nearshoring, rising consumer markets, and accelerated infrastructure investment.

Leading Locations

Mexico

 Since 2023 the Felipe Ángeles International Airport, also within the Greater Metropolitan Area of Mexico City, has now surpassed the Benito Juarez airport for air cargo with 2025 figures showing 413,224 metric tons in air cargo traffic.

The International Airport of Mexico City, known officially as Benito Juárez International Airport, stands out as the largest airport in the country and is now the second busiest air cargo hub in Mexico and number three in the LATAM region. The figures underline the importance of this hub. In January 2022, the air terminal managed a total of 41,650 tons. In 2023, this number rose to 47,206.8 tons, reflecting an important increase of 5,556.8 tons. It is important to mention that this airport also acts as a center of operations and connections (HUB) for the Mexican airline Aeroméxico, further strengthening its strategic position in the airport and logistics scenario in the region.

The International Airport of Cancun (CUN), located in the Mexican Caribbean, is a major hub in cargo handling in Latin America. With leading-edge facilities and advanced systems for the processing of goods, the airport handles a diversity of products, including consumer goods, textiles, electronic parts and pharmaceutical products. Its strategic location makes it crucial for trade routes between North America, Latin America and Europe and it has undergone constant growth in its volume of cargo.

Colombia

El Dorado International Airport is in Colombia’s capital city, Bogotá, and stands out as the third most important airport in Latin America in terms of freight volume. It registered a 2024 throughput of 809,00 tons, with flowers, perishables and pharma being the main categories.

Colombia has consolidated its position as a world leader in the export of a wide range of products, including products derived from agriculture, foodstuffs and chemical products. The airport has also been consolidated as the center of strategic operations (HUB) for international airline, Avianca.

Two 3,800 m runways at 8,360 ft elevation make BOG a purpose-built wide-body freighter hub. Cargo airlines position here to bridge east-west schedules across the Caribbean, giving forwarders same-night connections into MIA, AMS, and DOH.

Panama

Tocumen International Airport (PTY), Panamá City handled 216,653 tons in 2024 (a 4% increase over 2023). PTY sits astride the Colón Free Zone and the Panamá Canal rail link; a third runway is budgeted for development in 2027 to future-proof capacity.

A new development project called “Tocumen Cargo City”, with an area of 124 hectares, which includes the concession for the development of the cargo terminal and logistics zone, was announced in 2024. This project will take advantage of Tocumen’s competitive advantages as the region’s main air hub that connects daily more than 80 commercial destinations, and more than 50 air cargo destinations integrating a multimodal axis with the country’s maritime and land transport operations,

 Peru

Jorge Chávez International Airport is in the region of Callao, outside of the metropolitan area of Lima (Peru). It stands out as the center of operations and connections for LATAM Airlines.

In 2023 the airport handled 230,993 tons of air freight. The largest quantities of air export products were fresh asparagus, blueberries, salmon and other seafood. In 2024, the airport also added another runway and a new passenger terminal with an adjoining logistics park.

Brazil

São Paulo-Guarulhos International Airport (GRU) had a throughput of 235,600 tons in 2024. Air-sea multimodality is boosted by a 90-minute drive to the Port of Santos. Automotive, machinery, pharma cold-chain (largest airport cool-store in Brazil) are the highest categories of products.

Campinas Viracopos (VCP) airport, in Sao Paulo state (not the city) handles roughly one-third of Brazil’s imported air freight and was voted 2024 Cargo Airport of the Year by routesonline.com . It boasts a 90,000 m² cargo terminal with 11 dedicated cold rooms and a live-animal zone.

 Looking Forward

Governments are aware that there is now fierce rivalry to attract air cargo logistics operations and several have identified the sector as a key segment which would improve the competitiveness of their economies and stimulate economic growth and create skilled employment opportunities. Integration of air cargo, ports, incentives and free zones have become a cornerstone for attracting logistics and manufacturing companies.

Cargo airports in Latin America are writing the next chapter in hemispheric logistics. For independent freight forwarders, and other investors, these hubs are not just transit points, they are strategic pivot points to shorten lead times, diversify modal risk, and command premium margins in niche verticals. Airports are emerging as focal points in this new logistics landscape. Policy support, geography, and international partnerships are essential to attracting international operators and service providers.

Several countries have made successful initiatives to increase investment in the multimodal logistics space including the Dominican Republic, El Salvador (with a focus on increasing Maintenance Repair and Overhaul operations) Ecuador and La Aurora International Airport in Guatemala becoming a major hub, with LAATS, a Guatemalan logistics and freight company, managing all regular cargo flights there.

Attracting Investment in the Caribbean

For countries in the Caribbean to consider becoming air cargo logistics locations, they require international operators to view them as viable long-term locations, therefore several factors need to be considered.

Cold-Chain certification is a cornerstone for diversified airfreight operations. Pharma shippers demand IATA CEIV or WHO GDP accreditation. GRU, VCP, and LIM all hold multiple certifications, allowing forwarders to move temperature-controlled cargo without auxiliary containers significant cost saving.

Customs & Free-Zone Synergy have been the defining characteristics of a country’s success. Many airports interface directly with bonded zones or inland ports. Panama’s Tocumen International Airport’s on-airport logistics park and Panama Pacifico free zone cut transfer times by 24 hours compared with off-site warehousing.

Customs Harmonization and Focused Incentives

Caribbean countries must consider integration of the electronic DUCA-F, a fundamental document for the export of products originating in a Central American country to other countries in the region, within the framework of current trade agreements. It integrates and connects the customs systems of the six countries that make up the Central American region. This interconnection significantly improves customs controls, allowing for the automatic validation of declared data and real-time verification of approvals issued by the single windows and customs authorities of each country.

Airports may waive or discount landing fees for 1–2 years to attract new carriers or new routes. Sao Paulo’s Viracopos International Airport in Brazil runs an incentive program for cargo carriers as it looks to strengthen international hub’s cargo activities. The program aims to develop Viracopos as an international cargo hub, and the gateway’s operator – Aeroportos Brasil Viracopos – wants to increase the number of international flight routes and cargo frequencies. Some of these incentives include 100% exemption of landing fees for operations at the airport’s cargo terminal for the first 24 months of a carrier’s cargo operation.

Like landing fees, building rents can be discounted for air cargo carriers. For example, St. Louis International Airport offers 18 months of waived terminal building rents and landing fees for new transoceanic service and related logistics. Income tax exemptions for the first four (4) years of operation and reduced tax rates (sub 10%) for air cargo-related logistics operations are other ways to compete with nearshore rival locations. Income tax exemptions on rental for developers are essential for infrastructure development. These exemptions can be for twenty years, combined with a reduced tax rate for the following years.

Several Caribbean countries have declared intentions to compete for investment in air logistics, however very few (except for the Dominican Republic) have made it a priority with an accompanying tactical and focused execution plan. Caribbean countries who wish to position themselves as an air cargo hub need to have feasibility studies done by internationally recognized logistics companies along with a well-defined plan for what reasonable short-term and long-term success looks like. It’s also essential to have a realistic outlook of what each country can offer, rival strengths and incentives and a clear understanding of any deficiencies which may pose headwinds to their stated goals.

The main aviation industry event in Latin America and the Caribbean will be held under the theme “The Connectivity Frontier: Exploring New Opportunities in the Region”. The agenda highlights the importance of collaboration between the aviation industry and government agencies, with a specific focus on improving regional connectivity and competitiveness. Specific topics include travel and tourism, technology and innovation, operations, sustainability, and distribution.

Frederico Pedreira, CEO and President of Avianca, and Peter Cerdá, IATA’s Regional Vice President for the Americas, will participate in the event along with other prominent CEOs of airlines from the region, including:

• Roberto Alvo – CEO, LATAM Airlines Group
• Pedro Heilbron – CEO, Copa Airlines
• Estuardo Ortiz – CEO, JetSMART Airlines
• Adrian Neuhauser – CEO, Abra Group
• Erika Zárate Bahamón – CEO, LATAM Airlines Colombia

In line with the conference’s goal of developing solutions along the aviation value chain, the list of speakers is also composed of representatives of various industry stakeholders, such as:

• Arturo Barreira – President, Airbus Latin America and the Caribbean
• Natalia Bayona – Executive Director, UN Tourism
• Ricardo Bernardi – Partner, Bernardi & Schnapp
• Carolina Betancourt- SAF Project Director, BioD S
• Rafael Echevarne – Director General, ACI-LAC
• Natalí Leal – General Manager, OPAIN
• Victoria Platt – Vice President, Airline Strategy and Transformation, SITA
• Roberto Roselli – CEO, Plus Ultra
• Harris Whitbeck – Minister of Tourism, Republic of Guatemala

The aviation industry plays a key role in the economic and social development of all of Latin America and the Caribbean. The sector supports more than 8.3 million jobs and generates an economic contribution of about $240 billion USD to GDP (2023). Estimates indicate that these figures will almost double by 2043, reaching 15 million jobs and a contribution of $500 billion USD to GDP.

Bogotá was selected to host this event due to the growing relevance of the Colombian air market. In 2023, the air transport value chain contributed $15.5 billion USD to GDP, representing 4.3% of Colombia’s total GDP, in addition to generating 921,000 jobs.

Photo credit: IATA.

As Yeison Mesa, leader of OSEMCO, told Bogota television channel CityTv, the protest stems from months of unfulfilled commitments and the lack of government response. The demands include the redesign of the agency’s organizational structure and the implementation of a decree allocating a budget for bonuses for workers.

The actions are in response to the government’s failure to implement measures promised last winter, such as hiring additional staff to meet the rise in air traffic.

Just before the current protest, workers carried out symbolic demonstrations, such as covering Migración Colombia offices and border posts with protest posters. While the unions insist that they are open to dialogue, they are pushing for long-overdue improvements to working conditions and the proper functioning of Colombia’s migration services and will keep the “plan tortuga” until the implementation of the agreements made with former Foreign Minister Luis Gilberto Murillo.

The protest does not involve a full work stoppage. Instead, migration officers will continue their duties, such as stamping passports and verifying documents, but will strictly adhere to all formal protocols, significantly slowing the process. This tactic, commonly referred to in Colombia as a “plan tortuga,” is expected to generate long lines and extended wait times at international entry and exit points.

Airports expected to be most affected include El Dorado in Bogotá, José María Córdova in Rionegro (serving Medellín), and Alfonso Bonilla Aragón in Cali — Colombia’s busiest international terminals. The unions have urged travelers to arrive at least four hours early for their flights to account for the slowdowns. Meanwhile, Migración Colombia, the government agency overseeing migration procedures, echoed the advice through their social media platforms and website and encouraged passengers to remain informed through official channels.

The International Air Transport Association (IATA) has also raised concerns, warning that the slowdown could harm airport efficiency and airline punctuality. In a statement, the organization urged passengers to use the BioMig system — an automated migration checkpoint for registered travelers — and to stay informed on flight status. The IATA also emphasized that airlines should not be held accountable for delays caused by labor disputes outside their control.

Headline photo: El Dorado Airport. (Photo: Carolina Cuervo)

Market indications: International Strength vs. Domestic Contraction

We are beginning to see a marked difference between international and domestic market segments:

International markets: Demonstrated a growth of 5.6% year-over-year, with capacity expansion of 4.5% in February 2025.

Domestic markets: Contracted by 1.9% against February 2024, with a corresponding 1.7% reduction in capacity

This divergence suggests potential structural shifts in travel patterns that warrant attention from institutional investors with exposure to airline equities, particularly those with differentiated domestic and international revenue streams.

Regional Economic Performance Indicators

The following regional performance metrics (all percentages refer to RPKs), provide valuable insights into broader economic conditions:

North American market: A 3.2% contraction in this mature market correlates with recent Federal Reserve consumer sentiment data showing weakening discretionary spending amid persistent inflationary pressures. This represents a potential leading indicator for Q2 retail performance. The increased US tariffs are the sword of Damocles that hangs over Tourism North America.

Latin American market: 4.6% growth despite regional economic challenges demonstrates resilience in travel demand despite economic challenges in the region. This suggests that travel demand remains strong, even in the face of potential financial instability or slow economic growth. The fact that more people are flying indicates a level of consumer confidence and business activity that supports airline growth.

For Colombian investors, the 8.0% expansion in Brazil’s domestic market is particularly noteworthy, suggesting robust intra-regional business activity that may benefit Colombian export sectors. The significant increase suggests that travel within Brazil is expanding rapidly, driven by strong business activity, tourism, or economic resilience. This could signal increased trade and investment opportunities within Brazil, benefiting Colombian exporters who rely on intra-regional trade.

Asia-Pacific market: 4.2% growth continues to underperform its historical average, indicating that the region’s economic momentum may level off, with implications for global supply chains and commodity demand.

European market: 4.3% growth despite economic headwinds in the region suggesting continued strength in tourism and business travel, potentially providing support for the Euro against the dollar. Here, any North American loss could potentially become Europe’s gain. Watch this space: the tariffs will impact Travel into the USA.

Yield Implications and Revenue Management

The divergence between RPK growth (2.6%) and ASK expansion (2.0%) suggests the potential for yield improvement, a critical metric for airline profitability. It goes without saying     that in capacity-constrained environments, pricing power typically accrues to carriers with dominant market positions.

Market-Specific Analysis: United States

The 4.2% contraction in domestic U.S. air travel represents a significant deviation from historical patterns and merits close scrutiny. Possible contributing factors include:

• Softening consumer confidence amid continued inflationary pressures
• Potential shift in corporate travel policies favoring virtual meetings
• Price elasticity thresholds being tested following multiple fare increases

These indicators align with recent retail sales data suggesting consumers are becoming increasingly selective with discretionary expenditures. For financial institutions, this may presage broader pullbacks in consumer spending in Q2 2025.

Market-Specific Analysis: Colombia and Latin American Context

For Colombia’s financial sector, several data points warrant attention:

1. The 6.7% growth in Latin American international traffic indicates strengthening regional business connectivity
2. Brazil’s domestic market strength (8.0% growth) suggests regional economic resilience
3. The relatively high load factors (81.6%) indicate effective capacity management by Latin American carriers

These metrics suggest the potential for a continued strong performance from Colombian carriers with significant international operations, particularly those serving business routes connecting major regional financial centers.

Investment Implications

There are many forces that have investment implications. Here, however, is a broad overview for institutional investors and financial professionals:

Airline equities: Consider overweighting carriers with strong international exposure while underweighting those heavily dependent on North American domestic markets

Airport operators: Companies managing international hub airports may outperform those primarily serving domestic markets

Aircraft lessors: The continued growth in international ASKs suggests stable demand for wide-body aircraft

Foreign exchange: Continued strength in international travel may provide support for currencies of tourism-dependent economies

Economic Indicator Correlation

The divergence between international and domestic air travel correlates with broader economic indicators:

• International business travel often leads capital investment by 3-6 months
• Domestic leisure travel typically correlates with consumer discretionary spending
• Air cargo demand (not covered in this data) often serves as a leading indicator for trade volumes

Financial professionals should integrate these aviation metrics into their broader economic analysis frameworks for improved forecasting precision.

Forward Outlook

While February’s data established volume records, the deceleration in growth rates and negative performance in key markets like North America may indicate the early stages of a broader cooling in the global transportation sector. This aligns with central bank projections of economic moderation in late 2025, suggesting that aviation metrics are functioning as effective leading indicators for broader economic activity.

For financial institutions with exposure to travel sector debt instruments, enhanced credit monitoring may be prudent, particularly for carriers with high operating leverage and significant exposure to underperforming regional markets.

Notes: RPK is calculated by multiplying the number of paying passengers by the distance they traveled in kilometers and ASK by multiplying the number of seats available by the distance flown.

Source – Airline data: International Air Transport Association (IATA)

Photo: Loren Moss

Through this new option, which is available at customer contact points such as booking flow and management, special assistance website, and contact center, the airline, in addition to identifying travelers, can adapt its service to the needs of users who require it, providing an increasingly accessible experience according to their needs. To date, more than 1,500 people have voluntarily used this code.

“Inclusion, diversity, and accessibility are a priority for Avianca, so we are taking a step into the future and creating strategies that are more friendly to all our users. We are happy to provide solutions to allow people to have tools at hand that accommodate their needs and allow them to have a better experience when traveling,” said Michael Swiatek, Chief Accessibility Officer of Abra.

Since each person is different and their needs may vary, when requesting the contact center, the user, or their companion must explain to the Avianca agent what type of help or assistance they require. If the request is made through digital channels, it is advisable to go to the counter at the airport to detail the type of support they require. This initiative is part of the more than 32 actions that make up the “Avianca Accessible” program, which was born to understand each disability, its characteristics, and the best way to address them with a quality and personalized service.

One of the biggest challenges in accessibility is understanding the world of neurodiverse people and their specific needs in contexts such as air travel. Therefore, in addition to the DPNA code, Avianca has worked on actions to train its teams in assertive communication, definition, and characteristics of each disability, as well as handling challenging situations.

In addition to this, the recent launch of its website on accessibility (Avianca—Intellectual Disability), which includes a specific section to serve travelers with intellectual or cognitive disabilities, in addition to a guide built together with Lifesense, (a Bogotá-based mental health service) which includes specific recommendations so that this group of travelers can better prepare.

Headline Image Credit: imslavinsky from Pixabay.

Colombian domestic and international air travel since 2019 (courtesy IATA)

Colombia’s air passenger traffic reached nearly 37 million from January to August 2024, according to Colombia’s Civil Aeronautics Authority. Domestic passenger volume saw a 15.6% increase compared to the same period in 2023, with 21.7 million passengers, representing a 27.9% increase over pre-pandemic 2019 levels. International travel also rose, with 15.2 million passengers, up 21.8% year-on-year.

Total seats offered rose 22.4%, with frequency increasing by 17.5%. Routes showed modest variation, with slight domestic increases offset by a 0.3% decrease in international routes.

Paula Bernal, Country Manager for IATA Colombia, attributed the sector’s growth to expanded seating capacity and reinforced traveler trust, reflecting higher demand and efforts to boost connectivity across Colombia.

The Dominican Republic has a very strong reputation as a tourist destination, but now, a group of entrepreneurs hope the country can become both a hub for travel in the way that Copa has made Panamá a connection point, and home for a competitive low-cost airline with Caribbean flavor. Finance Colombia’s executive editor Loren Moss was able to speak to Victor Pacheco Mendez, the CEO and co-founder of Santo Domingo based Arajet. The low cost airline startup is already running routes between the Dominican Republic and regional destinations throughout Colombia, Perú, Ecuador, México, Central America, even island destinations such as Curaçao, Aruba, Sint Maarten and Jamaica.

Finance Colombia: I remember years ago there used to be Dominicana de Aviación but then for a very long time there has been no flag carrier in the Dominican Republic. The founder of VIVA—one of the co-founders, William Shaw was in the region, he was working on something but then he left to go and do other things; why has it been such a challenge to get an airline launched to cover the Caribbean and to be based out of the Dominican Republic?

Victor Pacheco Mendez: Well, I think that if you, if you research the failures within the whole Caribbean, you find that the list is huge, so there is a reason for that and a lot of it has to do with, most of the carriers that have tried to start in the region have been mainly opportunistic carriers that find some ethnic roots or somebody with some money that thinks that they can do some type of operation, but this is the first time that somebody really tries the ULCC (Ultra Low Cost Carrier) business model in the Caribbean.

Arajet CEO and founder, Victor Pacheco Mendez

So, I think that the first thing was figuring out what was the right model and once we did that—and William was one of my seed investors so, William was with us, I hired him in the beginning. At that time, we were called Flycana. A good friend of mine, William. But eventually his dad was falling ill, he was living in Mexico and he got the opportunity to go to Interjet and basically, of course he continues to be a shareholder in Arajet, but he left to do that.

And it took us out a long time, to get Arajet done because it was about putting together the right pieces; it was about convincing the government on changing regulations, to legislate on behalf of the commercial aviation space, it was about being able to compare the DR fiscally to other hubs and be able to convince the government that we have to able to have to have the corporate environment to be equal to other jurisdictions so that a local carrier could compete within the same, let’s say, environment, and that wasn’t the case when we started the journey so, we had to advocate and we continue to do so, we still have some what we called barriers that we are working [on] strongly with the government.

I think, if you see the newspapers of two or three days ago the [Dominican Republic] president said that he is sending from his office legislation that will make the DR (Dominican Republic) more competitive from a fiscal point of view. So, it’s been just a very difficult ride, just with the government piece alone has been very challenging and then besides that of course, we have assembled a team of experts that have built ULCC carriers in other continents, in other regions. In Latin América, for example, our COO is Garret Malone, who was the COO of Viva when Viva started in Colombia, eight years he was the COO of Sky Chile, so having Garret as COO tremendous experience, a veteran, it’s a great thing, he’s a great team member to have and then it was about finding the right capital provider.

We sold the business plan since 2017, 2018. We almost got funded in 2019 and then in 2019, we missed the boat, which is now a very good thing that we did, because then COVID came along. That would have been death! And then, in 2021 once the scare of COVID was leaving we went back to the institutional markets to sell our business plan again and we found a lot of interest. It was incredible, we were almost running an RFP to see who our capital provider was going to be and the main choice was not about valuation, for us the main choice was about who’s the right partner, who do we think as a firm, will support us and will believe in our vision of what we believe we can achieve with Arajet and about chemistry, you know

We ended up selecting Bain Capital and Griffin Asset Management just because we felt that with this guys were a good fit for us and now, I can confirm that having been working with them a little bit more than a year, that these are great partners to have, they, you know really believe in the vision that Arajet has.

Finance Colombia: Now, being based out of the Dominican Republic it’s interesting because for a long time the Dominican Republic has been an attractive tourist destination, but you have you already have some competition. For example, Viva flies between Medellín and Punta Cana, Wingo flies to Santo Domingo, if you look in other countries, American Airlines has historically jealously guarded its Caribbean routes and been very aggressive to try to battle competition when it comes between let’s say Miami and the Dominican Republic, or Puerto Rico and Dominican Republic, which has always been a popular route. How would you stay profitable or reach profit and then defend your market and grow your route network against such entrenched competitors?

Victor Pacheco Mendez: Look, Loren, we’re not inventing the wheel. I think that we’re applying the game book or the playbook that other ULCCs have used before. If you look at our 18 routes that are now on sale at https://www.arajet.com/  we only have direct competition in three routes, meaning there are 15 uncontested routes. This [strategy allows us] to mature and give you that oxygen that you need. So, it’s about serving brand new routes and about a mix…about some competition but when we finish creating our network of 54 routes, we will only have direct competition in about 25 of them, at that point.

So, it’s about when do you launch routes where you compete and how you grow brand new, existing routes and you have to try to balance out that. But the good news, and what you can potentially say about us that we will not compete with one carrier for more than six percent of our entire network

Finance Colombia: Now, I look at your route network. You are covering in the Caribbean Kingston, (Jamaica) some of the small islands like Aruba, Curacao, Saint Martin. What about destinations like the US market or Puerto Rico which is “kind of-sort of” the US market but certainly with Puerto Rico’s close ties to the Dominican Republic; What are your plans there? Do you have plans to expand outside the Latin American countries?

Because it looks like you’re already very mature and well along the way as you go, and I would think that also Santo Domingo could be a good kind of a transit point, if look at it. I am not telling you what your strategy should be, but I’m kind of asking the question: If you look at what Copa has done by making Panamá a connector between South America and North America, I always wondered, let’s say if I was flying from the US through a Caribbean destination maybe to a destination in South America, is that all viable? Do you have that in your plans?

Victor Pacheco Mendez: Without a doubt. The reason why we will connect 54 routes from Santo Domingo is because Santo Domingo will be a hub where we will be transferring passengers. So, if you look at what we have done, imagine now when we go north, we are going to fly to 17 destinations in North America that includes Puerto Rico. when we go north, we are not only taking the DR up north now, we managed to get a footprint in South America and Central America and the Caribbean. So, when we go north, it gives us some leverage because in the US you do have more of a competitive environment.

So, you can’t get away with operating, you know, 80% of your routes brand new, you are going to have more competition. So, that’s why people ask us: “how come you don’t fly into the US?” Well, we will fly to the US. We will fly to 17 points into the US but we needed to get a base down South into Central America and the Caribbean so that when we do fly into the north, we have the possibility to offer connections.

Finance Colombia: That’s smart. I think that if you look at the airline that Mr. Shaw started, they went international, went into Panama a bit early in their life, and had to retrench and pulled back out. But when they got stronger, then they went into US and now they have routes into Miami and Orlando and, I know that they have publicly said that they have some other ones in the works going into South America…Brazil, Argentina now.

So tell me, you mentioned some of the institutional investors, tell me about maybe a little bit about your history and the management what’s your background, I would imagine that you have been in the airline industry?

Victor Pacheco Mendez: Yeah, I started initially—it was the first airline in the Dominican Republic to ever operate new generation equipment. I initially started with an (Airbus) A320 chartering out of the Dominican Republic. The more confidence I got, the more I learned. That’s how I got the idea of changing to a ULCC model, but Arajet exists on top of that. Arajet is a reformatting of that charter that was called Dominican Wings.

Before the airline activities, I was in commercial banking, financial services, business development, real estate development, but I come from a family…my grandfather is an entrepreneur by the name of Victor Mendez Capellán. All of his businesses where focused on the diaspora.

So, in the sixties, he was the first IATA travel agent in the country, and he was responsible for sending a lot of Dominicans to work in the free zones in New York when we were living through a depression in the DR, so thousands and thousands of families, he managed to help them finance their trips to go work there and eventually all of the family would join them. So after that, that brought in American Express, so he represented American Express in the DR, and then that success brought him Western Union and he was the first agent ever, when Western Union went International. DR was the pilot and it had to do with his entrepreneurial track record. So, today he is 94, and his company which is now a commercial bank conglomerate, tends to the diaspora and they still exclusively represent Western Union.

Finance Colombia: Remesas Vimenca? I know them well.

Victor Pacheco Mendez: Yeah. That’s my grandfather. That bug inside of me because I worked with him for many years—what else can we do for our people? What else can we do for the diaspora? And an airline was…it wasn’t really about an airline. Initially, it was about how can I lower travel [costs] for our people? And how can we continue growing and supporting them? The only thing was that he thought that my idea was too ambitious, so he didn’t support me with capital.

He supported me with his heart and wished me well, and that is why it took me too long to get this done because you know I’m not a wealthy individual. I had to find partners and I had to raise money. In 2018, I raised my first $2.5 million (USD) in order to get this done and then we capitalized Arajet and with Arajet, we the retail value of the order we did with Boeing with the help of Bain and Griffin was up to the tune of three billion dollars’ worth of aircraft.  I never imagined it was going to be such a big transaction.

You know, now, we are the first airline ever in Latin America to be born with brand new aircraft and I was trying to solve for lower fares for the country, but it was a tremendous amount of factors, when we we met the people from Bain and they saw the vision, they said, ‘you know, we really believe in this but a country without having a carrier, a successful carrier of this scale needs an OEM meaning an aircraft manufacturer to be in the country as strategic partner,’ my business plan was leasing aircraft.

And so they said, ‘look, we really need to sit down with you because we don’t believe in this unless there’s an OEM based in the DR and to do that we need to buy planes from them.’

And so now, Boeing is established in the DR and they accompanied Arajet from the maintenance, technical and flight point of view, which is tremendously helpful and is the first phase of a partnership that will be successful.

Finance Colombia:  Wonderful. I appreciate you spending so much time with us. I cannot think of anything more difficult than to starting an airline, the only thing more difficult is making it successful. So, we are really glad to see you and want to see your continued success.

Headline photo: Arajet approach at Princess Juliana International Airport in St. Maarten (courtesy Arajet)

The planet will need to revive air transport and it will not be an easy task. It will require coordinated efforts from all actors in the value chain at the local, regional and international levels. There will be two stalwarts for this process to work: government aid to airlines and passenger’s confidence in flying back again that could be delayed as happened in 2001 after the 9/11 attacks.

See also: Stuck Inside (or outside) Colombia? Here Is What You Should Do Now (click)

Recently, the US financial firm JPMorgan Chase, in its annual conference on air transport released worrying information. Several international airlines had a few months to live if their planes were still on the ground. In the case of Latin American airlines, Avianca was forecast three months; to LATAM four months; to Azul six months and to COPA ten months, among others.

Added to this is that some of the main aircraft leasing companies in the world began to lose their patience and asked their aircraft to return to various airlines such as Interjet in Mexico, reducing their ability to react once this global health crisis is overcome, which prevents normal air travel. Aircraft lessors should also be quarantined.

Some airlines in the region have already asked their governments for help with negative results, as has happened in Chile, Brazil & Mexico. It has not been enough to license or advance vacations or retirement to part of its workforce. According to IATA data, about 25 million people worldwide depend on the aviation industry directly, which requires a lot of fresh money daily to be in the air and competing for a piece of the market that allows them to survive. There is a belief that it is a very rich industry, but deep down it is an industry with an almost infinite need for cash flow and daily capital to stay on the air.

And, given the limitations that all governments now have in terms of financial resources to deal with the ravages of the pandemic, there is little room for maneuver to support large companies such as airlines without affecting the social component demanded by small and medium-sized companies in these cases too.

Therefore, it is not clear how the airlines will be when the aid can arrive and in what way, in the midst of this economic turmoil, since they are not even able to take advantage of the low fuel prices that are experienced at this time. For now, some cargo and humanitarian flights paid by governments operate marginally. What is certain is that air transport, at least in Colombia, is considered a legal public interest and therefore will have an opportunity to survive.

Sergio Escobar

The opinions expressed in this guest editorial are solely those of the contributor and do not necessarily represent the views or positions of Finance Colombia, its publishers, journalists or staff.

Penalty system

The new provisions encourage direct compensation to the passenger from the air carrier, in case of dissatisfaction, avoiding a lengthy administrative process.. The compensation process is to be closely monitored by Aerocivil for timely processing and resolution of passenger complaints.

• Penalties for service failures increase and the procedures for filing complaints and claims are streamlined
• The right to cancel ticket purchases is established
• Emphasis is made on earlier solutions and passenger compensation
• These requirements are set out in Resolution 1209 of May 25, 2015

The measures also seek to increase the amounts established by sanctions by up to 50%. For example, in the case of flight delays, it reduces the waiting time from two hours to 75 minutes, and the penalty is increased from 15 SMMLV (This is a multiple of the current Colombian minimum monthly salary, currently at $644,000, or roughly $275 US dollars—so 15 SMMLV is roughly $4125 USD) to 23 SMMLV. The longer the delay, the bigger the penalty becomes.

Other sanctions that were increased include those for the bumping and rebooking of passengers because of canceled flights, baggage handling failures, and not keeping airport data and information systems (such as the databases that update the arrival and departure screens) current and updated at all times.

*CLMMS: Current Legal Minimum Monthly Salary

 Right to withdrawal

One new provision that did not previously exist is the right to withdrawal, and this rule has implications for both travel agencies and airlines.  The right to withdrawal allows passengers to cancel airline tickets within 48 hours of purchase.  In this case, airlines may retain up to 5% of the value of the ticket, or in the case of promotional fares, up to 15%.

In  case of withdrawal, Aerocivil ordered that the passenger can cancel the trip up to eight calendar days before domestic flights and up to fifteen calendar days before international flights. In this case, airlines can retain up to 15% of the value of the ticket and, when it comes to promotional fares, the maximum amount that the airline can retain goes up to one third of the value of the ticket.

The airlines must return the money to the buyer within five working days, or for Internet sales, the repayment period is fifteen calendar days.

These measures aim to encourage airlines to provide all the information on their promotions and fares in a clear, accurate, complete and timely manner, and for them to comply to the letter with everything they offer. Furthermore, fares must be registered in advance with Aerocivil to be valid and enforceable.

The new rules also sanction angry passengers who take matters into their own hands, as has happened recently. The new measures establish that those who mutiny and take over an aircraft will have a drastic sanction of 18 SMMLV and for those forcibly entering the crew’s cabins the penalty is 20 SMMLV.

The process of investigating complaints and claims has also been overhauled. Previous to the changes, any administrative process related to an air transportation infraction or failure took up to 15 months. Now issues must be resolved within a maximum of eight months, which means a reduction of almost 50% and ensures timely due process.

Monitoring and verification audits

For the first time, Aerocivil establishes verification audits that will track the airlines’ ability to deliver adequate and timely service for travelers. In addition, surveillance and inspection of passenger service areas such as ticket counters, baggage claim, information stands, and other areas are increased in order to establish new procedures and best practices in order to improve the service provided by different airlines.

With El Dorado International Airport being the one with the largest in passenger traffic (24 million annually), it will be used as the pilot location for implementing these new measures and making any necessary adjustments.

Some of the new measures include:

• Strict control and monitoring of compensations.
• More people of the Aerocivil working in inspection and surveillance in airports.
• More customer service offices and more training.
• New group specialized in monitoring and auditing at airports (random audits).
• Better processes and follow-up testing and verification.
• Surveillance, especially at the counters, in the baggage claim and the information provided to passengers.
• More channels of information and follow ups through the Aerocivil website, the Colombia Airports app, social networks (Facebook, Twitter), and passenger guides.

These new provisions and measures aim to increase compensation to passengers,  ensure faster completion of checkin and baggage claim processes, a reduction in claims, a growth in revenue from penalties, and a reduction of pending processes in a quickly and timely manner.