By: Staff Writer
November 1, 2024
A senior banker said that Latin American and Caribbean (LAC) Airlines have gotten back to profitability since the pandemic and that for 2023 operating profits was over $1 billion and expected to be over $3 billion for 2024.
Michael Lindenberg, equity research analyst at Deutsche Bank, speaking at the Latin American and Caribbean Air Transport Association (ALTA) forum being held at the Baha Mar resort in The Bahamas, said that the rise in profitability for LAC airlines is a “good story,” and that the region is trending above Europe now and steadily climbing.
Lindberg also said: “Over the last few years and seeing the global airline industry get back to profitability, and we broke it out by region, but I think the real success story here is to see Latin America right up there, sort of neck and neck with Europe, slightly higher than Europe is expected to be in 2024 with about a 6 percent operating margin.”
The numbers can even be higher because a lot of the airlines in the LAC are private and a lot of their financial data is still yet coming in. “I think it’s important when I look around the world and I look at which airlines receive meaningful support from their governments, the LAC got very little to none. The US got support. China got support. Middle Eastern Airlines got support, European airlines got support,” he added.
He also said: “The fact is, almost every US airline has gone through the chapter 11 process, and they’ve come out a lot stronger….And I think one of the key takeaways is when I look around this region, and I see the emergence of LATAM and Avianca and AeroMexico, and you have Copa, who didn’t go through the restructuring process, but has always been a formidable carrier. And we now have Azul going through a restructuring process… The five or six top airlines in this region are going to be, not only very strong within this region, but they’re going to be very strong globally.”
The December quarter, will gives a better sense of what’s driving profitability. Broken down by the various subcomponents and due to the fact that there are only four publicly traded LAC carriers, the aggregate for Copa, Volaris, LATAM and Azul, what will be seen for the December quarter, “historically, is one of the stronger, seasonally strongest quarters for the Latin American industry,” Lindberg noted
Lindberg added: “You’ll see that in 2023 the industry did about $900 million of operating profit those four carriers, so adding all of the carriers up for this year, we think it’s going to be over a $1 billion.
He continued: “What you can see is a big part of it is traffic. That’s up $480 million…. Yields are down. Some of it’s related to foreign exchange, but some of its yields and cargo is down a little bit.
“Cargo was coming off of a peak through COVID. We saw a down year last year. We’re seeing cargo stabilize, so cargo is only off a little bit. And then you can see the other categories like aircraft fuel is contributing $200 million $207 million to operating profit, just because fuel prices are low.”