New low-cost airline lands in Peru

November 4, 2016

MercoPress

CEO says air travel is too expensive in Argentina, Venezuela, Costa Rica and all around Central America. Air France-KLM unveil plans for new long-haul company to bring down costs without becoming a low cost brand.

VivaColombia's younger company Viva Air Peru is to extend the group's low cost airline services into Peru, starting in 2017, William Shaw, CEO and founder of VivaColombia said on Thursday in Lima. “We want to fly to any airport that allow us to have an operation for our aircraft,” which shall consist at first of two Airbus A-320 type airplanes.

In business since 2012, the Medellin-based mother firm aims at repeating the positive performance in its home country. Only three months after commencing operations, the number of passengers rose from 20,000 to 60,000. Viva Air Peru plans to add eight aircraft to its fleet by 2020.

Viva Air Peru estimates it will be transporting 700 thousand passengers next year by offering services to seven destinations: Lima, Cusco, Arequipa, Iquitos, Piura, Tarapoto, Trujillo and Chiclayo.

Shaw explained his firm found Peru attractive because of the “excessively expensive rates and the desire of the people to travel.” He added that air travel in Argentina, Venezuela, Costa Rica and, in general, Central America were very high.

Viva Air VivaColombia and Peru belong to Irlandia Aviation group.

Low-cost services appear trendy in the airline industry following Thursday's announcement by the Air France-KLM consortium of their plans for a new long-haul business with lower costs to try to regain market share from Gulf rivals, as it seeks to improve profits while restoring frayed relations with staff.

Like rival Lufthansa DLAKY 5.32% , Air France-KLM has been hit hard by the rapid growth of carriers such as Emirates and Turkish Airlines, which have used new planes and lower ticket prices to attract passengers away from hubs in Europe and through Dubai and Istanbul instead. Air France-KLM has long been trying to reduce costs at its Air France operations but has faced a series of strikes, notably over plans to expand low-cost unit Transavia.

Changing tack, the new business, set to have a fleet of 10 long-haul planes by 2020, will be staffed by pilots from Air France willing to move on a voluntary basis. Staff will be expected to work longer hours, and the company will aim to keep planes airborne for longer each day to cut costs. For the moment, the new airline will make up only a small part of the group, which is aiming for a fleet of 435 planes, not including regional jets, by 2020.

Air France-KLM hopes the new business, announced with third-quarter results as part of a new strategy by CEO Jean-Marc Janaillac, will help it return to profit on loss-making routes or reopen routes it closed due to competition. Although it was underlined that the new company was not trying to be a low-cost brand, market analysts preferred to be cautious and stick to the widely-spread phrasing and wait to see how or if lower costs are not tantamount to low cost.

“It will not be positioned as a low-cost carrier. It will have standards similar to Air France,” the group said. The consortium said it was aiming for sales of 28 billion euros ($31 billion) by 2020, with 100 million passengers, compared with 90 million in 2015.

Tags: air france, airline, klm, low cost, peru
Posted in LatAm, Macro Economics, Macro Economics