Tourists visiting the Tulum archaeological zone in Quintana Roo in December 2023 (photo) … [+]
Three major U.S. airlines are pouring capacity into the short-haul leisure market in Latin America. In the first half of 2024, weaknesses in this strategy became apparent.
“We’ve seen some weakness around the Latin American markets,” Andrew Nocera, United’s chief commercial officer, said during United’s earnings call on Wednesday. For both United and Delta, revenue per available seat mile in Latin America fell 12% to 13%, and yields fell 10% to 12%.
Delta’s Latin America revenue is expected to decline again by double digits this quarter due to short-haul market pressures, but both Delta and United executives say the long-term outlook is positive. Stated. Meanwhile, American Airlines, which has the largest presence in the region, is expected to reveal the biggest impact of market saturation in its earnings release on Thursday.
Despite the red flags, the rush to Latin American beach resorts continued last month, with all three major airlines arriving at the newly opened Tulum International Airport from hubs in Atlanta, Charlotte, Chicago, Dallas, Houston and Miami. began service to.
Tulum offers an alternative to Cancun, a highly developed resort where the airport can sometimes be crowded. “Historically, people flew to Cancun and drove to Tulum,” Frontier Airlines CEO Barry Biffle said in an interview. “I don’t know if more people are going to go now, but I think a lot more people are going to go.” Frontier flies to Cancun, but has not announced plans to fly to Tulum.
The Tulum initiative comes as yields and fares to Cancun have fallen. Average fares fell about 11% from January 2023 to January 24, according to aviation analytics firm Cirium. The average one-way fare in January, excluding taxes and fees, went from $226 to $201.
Statistics on Latin American growth, also compiled for this article by Cirium, show two additional trends. First, Caribbean resorts are experiencing a significant increase in production capacity. Second, Delta has led growth in both the Caribbean and South America. As Delta executives have repeatedly said, the airline wants to eat into American’s dominance in the region.
In Caribbean resorts, U.S. airlines increased capacity by about 18%, or 1 million seats, from the first quarter of 2023 to the first quarter of 2024, Cirium said.
Delta added 246,011 seats, a 32% increase in Caribbean resort destinations. American Airlines added her 239,606 seats, a similar number of seats, but he had a 13.5% lower increase compared to a larger base of nearly 2 million seats. United added 170,694 seats, an increase of 31%. JetBlue added 159,371 seats, an 11% increase, and Frontier added 100,220 seats, a 29% increase, according to Cirium.
Turning to South American destinations, Cirium said Delta increased its seat capacity by 32%, or 70,975 seats. American Airlines, which already had a strong presence in the region, added 55,284 seats, a growth rate of only 9%. United Airlines added her 32,366 seats, an increase of 14%.
Finally, looking at Cancun and Tulum, capacity to these two destinations increased by approximately 20% from Q1 2023 to Q1 2024. All 10 U.S. airlines serving Cancun have increased capacity. Cancun had about 2 million seats in the first quarter, while Tulum, which had just started, had about 4,000 seats.
In a report on April 11, Bank of American analyst Andrew Deidra said that considering American Airlines’ large presence in the first quarter results of the three major airlines, “the only downside is… “Weaknesses in Latin American routes could limit AAL’s revenue growth relative to DAL and UAL.” regional.
For Americans, Mr. Deidra wrote, Latin America is a “headwind” and so tough that “we see risks to EPS guidance.” In fact, Deidra cites multiple headwinds, including: Premium seats have been reduced across the fleet. A small transatlantic network. And it has significant exposure to Latin America, particularly short-haul markets. ”
