Hi Mikey,
not sure if you are MIA based but you seem to be a fan of what AA is doing there.... glad they have you for a supporter even if not everyone agrees w/ you.
To be fair, though, it is and should be fairly easy for AA to grow in Latin America, including from MIA.
- AA has over 40% of the market between the US and Latin America and is larger to/from Latin America alone than any other single Latin American airline in total size.
- AA is about as large as DL and UA combined to Latin America and AA has the advantage of being the only US carrier from MIA to Latin America, the largest gateway to the region. No other US carrier has the advantage of being the only carrier from the largest gateway to a global region.
- Latin America remains largely protected because of limitations on market access.
AA should and does do well to Latin America. And it only makes sense for them to focus as much of their focus on protecting the strongest part of their international network.
But there are some real challenges that have to be considered when talking about AA's growth in Latin America.
- AA's growth rate in Latin America is half of what other carriers are doing in aggregate to the region. Foreign carriers and US low fare carriers are growing much faster than AA.
- While MIA is the largest market to/from Latin America, many of AA's competitors are overflying it in order to increase their access to the market. Even in MIA, foreign carriers are growing faster than AA and the fastest growth is coming from carriers not aligned with AA.
- US low fare carriers are aggressively growing to the Caribbean and short-distance Latin markets while foreign carriers are growing from deep S. America - and both are bypassing/overflying MIA even though some foreign carriers are also adding flights to MIA. The effect is an overall weakening of the percent of Latin traffic that goes through MIA, which AA is able to control. MIA local traffic accounts for 10% of AA's Latin network which means they have to compete with other carriers for other markets where those carriers have a much greater chance of impacing the market.
- As the US domestic market becomes increasingly challenging for low fare carriers and for some network carriers, they will have much more incentive to fly to Latin America and the Caribbean. B6 has already picked off many of the largest NE and Florida markets to the Caribbean; WN will use its much larger US network to push into markets and regions that B6 can't support as well as to push into Latin ethnic markets where network carriers gain far higher revenues and have been more insulated from low fare carriers.
- Most of the region will have Open Skies within a couple of years which will also open up the possibility of immunized alliances between US carriers and Latin America. Because of AA's size, it is highly doubtful that the US government will allow AA to ally with most Latin carriers because they control the majority of every market in the region.
And Latin America is still the smallest global region and is subject to low fare competition that will not be a factor to Europe or Asia because of geography.
I'm glad that AA is growing in Latin America. They should.
Just don't underestimate that there are forces happening in the region which will make it harder and harder for AA to continue to do what it has been able to do in Latin America.
The challenge in Latin America, as it is elsewhere, is to adapt to a rapidly changing market in which other players continue to challenge AA in its core markets.
