South America

Yesterday we discussed British Airways lack of routes to South America and why many in the industry feel that now is the time for the airline to significantly increase its footprint.

BritishAirwaysChileSo, just where in South America might British Airways fly to? Well, let’s start with where we believe they won’t fly.

Despite its huge oil reserves, Venezuela has become something of a basket case, both economically and politically, so British Airways will not be flying to Caracas we don’t feel. The economies and populations of Bolivia, Ecuador, Guyana, Paraguay and Uruguay are still far too small so we don’t think that British Airways will fly to any of them anytime soon.

That leaves Argentina & Brazil, which British Airways already fly to, plus Chile, Peru & Columbia.

Argentina is really all about Buenos Aires and, as a result, we don’t see British Airways flying to any other destinations within the country.

TAM 767Brazil is the largest country in South America with by far the biggest economy and population. Although its economic growth has slowed, it is at least still growing, as is trade and tourism with the UK. The World Cup in 2014 and Olympics in 2016 are also sure to further increase traffic. Sao Paulo & Rio are Brazil’s dominant cities however and rather than risk new destinations, we feel that British Airways will simply increase capacity to Sao Paulo & Rio, either with increased frequencies or bigger aircraft (perhaps even introducing the A380 to Sao Paulo in time for the World Cup) and using TAM to generate increased feeder traffic.

Within South America, Chile, Peru & Columbia are possibly the most successful economies at present; all 3 are stable, outward looking and committed to free trade. Together with Mexico, they form the Pacific Alliance, the region’s newest and most promising trading bloc, committed to reducing trade barriers such as restrictions on airlines & flights.

Of these 3 countries, Chile, the most economically advanced, is probably the most likely new destination for British Airways, especially as oneworld partner LAN has its base in the capital, Santiago de Chile.

The economy of Columbia is also very strong and, with its relative proximity to the USA, British Airways’ key market,  we feel that Bogota would be the second new destination for British Airways within South America.

British Airways PeruFinally, Peru, like Chile, is a long flight from the UK but has a strong and growing economy and, far more so than both Chile and Columbia, has very strong appeal to the leisure market. We therefore rate Lima as the third most likely destination within South America to receive British Airways flights.

Whether any of these predictions come to fruition only time will tell. One slight caveat is that all 3 routes will only become practical once British Airways has the 787 in its fleet. As none have yet been delivered, and the first 7 have been set aside to replace existing, ageing 767s, it may not be until late 2014 or even 2015 that the airline can even consider new routes to South America.

787 Dreamliner

787 Dreamliner

 

 

 

 

 

South America has always been a relatively weak destination for British Airways.

The relative lack of business, cultural and tourist links between the UK and South America, together with the more recent scarcity of slots at Heathrow, has meant that British Airways has largely ignored the region.

This situation was further compounded by the 2011 merger between British Airways & Spain’s Iberia Airlines to form IAG. Unlike the UK, Spain has very close ties to almost all of South America and, as a result, Iberia’s long-haul route network is dominated by flights to the continent. Following the merger of the 2 airlines, it was therefore agreed that British Airways would largely leave South America to Iberia and re-route any UK traffic from Heathrow via Madrid.

As a result of the above, British Airways currently flies to just 2 countries within South America (Brazil & Argentina) and only 3 cities (Rio de Janeiro, Sao Paulo & Buenos Aires).

BritishAirwaysRio

In the past however, British Airways has flown to Santiago de Chile, Bogota & Caracas and there are those who believe that the time has come for the airline to make its presence felt again. There are several reasons for this.

Increasing trade & wealth – Despite a recent slowdown, the South American economy has seen several years of strong growth which has resulted in increased trade and living standards, both precursors to increased air travel.

Increased tourism – Although South America’s share of the UK’s outbound tourism market is still relatively low, it has grown strongly and consistently since the turn of the century and, with more direct flights, would probably grow still further and faster.

heathrow t5 at duskAdditional Heathrow slots – Scarcity of slots at Heathrow is still a problem for British Airways although the 2012 takeover of bmi in 2012 has seen the airline increase its share of Heathrow slots from just over 40% to just under 50%.

New aircraft – Any potential direct flights between the UK & South America would, in aviation terms, be defined as long and thin, ie it’s a long way to go and numbers would still be relatively small. The advent of new generation aircraft, such as the Boeing 787 and Airbus A350, will allow airlines to fly ultra long haul routes, non-stop, using far less fuel than current models.

iberia a319Difficulties at Iberia – The much publicised difficulties at Iberia, hugely loss making, embroiled in disputes with staff and flying old, uncomfortable aircraft, may convince IAG boss Willie Walsh that it is better for Iberia to lose traffic to British Airways than to competitors such as Air France & Lufthansa.

Lack of competition – Although the South American economy has grown strongly over the years, its airline industry is still relatively immature and standards relatively low. The other big advantage of British Airways flying south-west is that it doesn’t face any direct competition from the Gulf & South East Asian carriers that have made flying east so incredibly competitive.

LATAM – British Airways was a founder member of the oneworld airline alliance. With the merger last year of Chile’s LAN and Brazil’s TAM, and their subsequent announcement that the new group, LATAM, would also be part of the oneworld alliance, British Airways now has South America’s strongest airline group with which it can co-ordinate schedules as well as benefiting from local feeder traffic.

So where in South America might British Airways fly to? Check in tomorrow and I’ll share my thoughts…….

LanChile 767-300 air to air