Discount airlines hit Latin America
Tuesday, June 14, 2005
By Amy Chozick, The Wall Street Journal
The discount-airline craze that has transformed travel in the U.S., Europe and Asia, is starting to take off in Latin America.
Until recently, travelers covering long distances in countries like Brazil, Mexico, and Peru had either to take expensive full-fare flights -- often offered only by small charter carriers -- or else hop aboard a bone-jarring long-distance bus. However, a fast-growing class of discount airlines is starting to establish itself as an alternative. In the past year or so, at least four budget airlines have started offering service or have added cross-border flights serving not only major cities but tourist spots as well. Modeled on discounters like Ireland's Ryanair and U.S.-based Southwest Airlines, the upstart Latin carriers are offering fares as low as $20 between Sao Paulo and Rio de Janeiro. In some cases, promotional one-way teaser fares have been less than a dollar.
Several new carriers are about to join the fray. In July, Mexicana, Mexico's leading international carrier, plans to launch Click, a budget airline that will offer domestic routes from Mexico City to popular but tough-to-reach beach towns like Ixtapa on the West coast and Puerto Escondido, a onetime surfing hot spot now popular among nonsurfers drawn by its pristine beaches. Click also will take over Mexicana's routes to popular Caribbean spots such as Cancun and Playa del Carmen, and is expected to apply discount-airline pricing formulas to them.
In December, Brazilian startup GOL Linhas Aereas Inteligentes SA launched service to Buenos Aires from Sao Paulo with promotional fares starting around $167 (the lowest fare the Brazilian government would permit at the time) each way, compared with $300 or so on the country's major carriers. This month, the no-frills airline -- expect cold snacks and economy seats -- will begin flights to Santa Cruz, Bolivia, and also says it plans to add service to the capitals of Uruguay and Paraguay in the next few months.
The new airline competition corresponds with a surge in tourism to the region. With the the euro still strong against the dollar, U.S. citizens are flocking south. While the U.S. dollar has decreased by about 10 percent against the euro over the past two years, it has gained 7 percent against the Mexican peso. In Nicaragua, the dollar has been so strong against the Cordoba that a night in a luxury hotel currently goes for about $15 to $25.
The relative bargains are driving up travel. International arrivals to Central America are growing by nearly 11 percent a year, according to a study last year by the World Trade Organization. Tourism to Belize has increased by 50 percent over the past five years, primarily due to new interest among cruise lines. Peru expects more than a million tourists this year and two million annually by 2010.
The carriers can offer substantial savings and convenience for travelers who know what to look for. Nature Air in Costa Rica is serving new destinations like Drake Bay, a wilderness resort town on the beach that used to require a six-hour drive and two-hour boat ride to reach from San Jose. (Flight time: 40 minutes.) Tikal Jets has made it easier to reach Guatemala's famed Tikal ruins for $99 each way.
Air travel in the region has a reputation for being rough around the edges: Lengthy delays are commonplace, and government oversight in the past tended to keep prices sky-high, until a recent wave of deregulation. While traveling on the discounters may be cost-effective, it can cause headaches for vacationers unfamiliar with the region. Some carriers use major airports, but others fly into out-of-the-way landing strips with little or no infrastructure. Costa Rica's Nature Air, for instance, uses an old Sandinista airstrip on its route between San Jose and Granada, Nicaragua. Some little airports may make announcements only in Spanish or Portuguese. And on Gol, the most affordable flights are offered as part of its night service. Nicknamed corujoes (or "owls" in Portuguese), these flights operate between 1 a.m. and 5 a.m.
The budget-airline movement in Latin America comes at a time when discount carriers are dramatically reshaping the airline industry around the world. In the U.S., discounter Southwest Airlines has become one of the fastest-growing domestic carriers, expanding in recent years into nonstop transcontinental routes.
In Europe, traditional airlines have lost market share to budget carriers such as Ryanair and easyJet. Last month, Iberia, Spain's largest airline, announced that it would consider buying or creating a low-cost carrier of its own. In Asia, competition among discounters is so heated that flights on popular routes such as Hong Kong to Singapore have sunk as low as $25 each way.
The expansion of discounters in South America is happening as aviation officials are making it easier for carriers to add flights across borders. In May, regulators in Peru and Brazil signed an agreement to allow 28 flights a week between the two countries, more than triple the current quota of eight flights a week. A new Peruvian airline, Wayra Peru, is expected to enter the market as early as this month, serving 12 Peruvian cities including Cuzco, the town closest to the Machu Picchu ruins.
The new airlines are primarily targeting the millions of middle- and lower-middle class Latin Americans fed up with shelling out for bumpy, cramped 10-hour-plus bus rides between cities -- trips that can cost as much as $75 to $100 on some routes.
However, the new airlines are aimed at foreign tourists as well. U.S.-based travelers can buy tickets on these carriers' own Web sites, which typically have English options and allow bookings with major credit cards. Some of the airlines offer hotel and car-rental packages aimed at tourists. Tikal Jets offers discounts at the Radisson and Grand Tikal Futura hotels in Guatemala City when tickets are bought through the carrier's Web site.
Almost none of these carriers is listed on the big online travel agencies like Travelocity or Orbitz.
Mexicana's Click plans to offer code-share agreements with several carriers from abroad that will allow international travelers to transfer to Click flights. Click says its site, clickmexicana.com, will have an English option when it is launched in July.
Airlines remain a relative luxury in South America. According to AvGroup Inc., a Miami-based aviation consultant, fewer than 10 percent of the 500 million people in Latin America and the Caribbean travel by air.
Brazil's Gol airline -- named after the Portuguese word for "goal" in soccer -- was founded by the family that controls the country's biggest bus-travel company. It was launched in 2001 with just six planes traveling to seven destinations within Brazil. It now has 32 planes and flies to 40 airports.
Some carriers use smaller planes in their fleets. Nature Air's aircraft are mostly 19-seat twin-engine planes. Tikal Jets operates DC-9s, and Gol uses Boeing 737-700s. Civil-aviation authorities in South America require the budget airlines to meet the same aviation standards as established carriers.
Like many of the new discounters, Nature Air offers online booking and special Web-only discounts on its Web site, www.natureair.com.
Tikal Jets, Guatemala's national carrier, doesn't consider itself a low-cost carrier, but nevertheless it's targeting the low-fare end of the market as it expands. The airline, which also serves destinations in Belize and Cuba, offers special hotel/airfare package deals on its Web site, tikaljets.com.
Gol's Web site, www.voegol.com,
has listed low-cost teaser fares in an effort to build buzz. For instance, some special fares between Rio and Sao Paulo have been listed as low as $20 each way, not including taxes or fees, compared with $160 or so, round trip, on major carriers. The airline currently accepts only American Express for online international purchases, and U.S. travelers can't print electronic tickets.
Gol's night-owl fares sometimes even undercut the price of bus tickets. For instance, a four-hour night flight from Rio to the popular tourist city of Salvador starts at $65 each way. By comparison, a first-class bus trip (which takes about 24 hours) would cost about $70 each way.
Discount Flights in Latin America
A sampling of routes and fares from some of the airlines that are offering discount flights in Latin America:
ITINERARY: Mexico City to Ixtapa/Zihuatanejo
BUDGET AIRLINE FARES: As low as $99 each way
COMPARISON: $215 each way
COMMENT: Owned by Mexicana, Mexico's largest international carrier. Expected to launch this July.
AIRLINE: Gol Linhas Aereas
ITINERARY: Sao Paulo to Rio de Janeiro
BUDGET AIRLINE FARES: As low as $20 each way
COMPARISON: $85 to $200, depending on time of day
COMMENT: Gol offers extra deep discounts on its night flights, which operate from 1 am to 5 am.
AIRLINE: Nature Air
ITINERARY: San Jose, Costa Rica, to Granada, Nicaragua
BUDGET AIRLINE FARES: $99 each way
COMPARISON: $172 each way to fly to Managua, plus $25 to $30 for a one-hour taxi from the Managua airport to Granada
COMMENT: In Granada, Nature Jets lands on a refurbished airstrip that the Sandinista Army controlled in the 1980s.
AIRLINE: Tikal Jets
ITINERARY: Guatemala City to Belize City
BUDGET AIRLINE FARES: Around $130 roundtrip
COMPARISON: $400 round-trip
COMMENT: Most flights originate from Guatemala City. Tikal Jet's Web site offers special air/hotel deals.
Note: Prices don't include taxes and fees, and were converted from local currencies at current rate.