Southern latitudes

SANTIAGO – I’m in Chile this week for the FIDAE air show. It’s been a few years since my last visit here, so it’s great to be back and meeting with some old friends.

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A spectacular view of Santiago.

Over the weekend I wrapped up several days in Sao Paulo, Brazil.

My last visit to Sao Paulo was back when we were selling the Sonic Cruiser. So you get the picture that it’s been a while since I’ve been there as well!

I had some nice visits with airline customers, hosted a media roundtable with Brazilian daily papers and news wires, and had a briefing with aviation trade reporters. I’ve also done some television – a visit with Bloomberg TV, and a broadcast on a new business oriented cable television program called “Siga o Mestre.” That means “Follow the Leader.” It’s on the TV Ideal channel in Sao Paulo. I happened to be one of their first interviews in High Definition.

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My appearance on Brazilian channel “TV Ideal” was a lesson in the new realities of Hi-Def TV: lots of makeup required.

That’s why, in order to hide my flaws, I needed a treatment of spray-on makeup before the taping!

On the broadcast, we talked about the value of technology, how Boeing’s sales team works with airlines to provide the right products, about our progressive environmental plans, and the robust Latin America economy.

Speaking of which, air traffic growth here is one of the world’s highest, and the largest air carriers are as profitable as any in the world. Here at FIDAE, which happens to be the world’s 4th largest air show, I’m talking about this incredible growth - as you can see in the chart below.

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Latin America has seen nearly one-third more commercial airplane orders in 2007 than the previous record set in 2005. The efficiency and economy of the recently-ordered airplanes will help airlines manage costs and earn profit while boosting capacity. 587 total orders since 2000, of which 493 have come in the last 3 years.

One of the region’s most respected airline CEOs cites “the three Cs” of success: capital, capacity, and cost. All three have improved dramatically here in recent years. And it means airlines are able to invest in revitalizing their fleets and pursuing growth strategies.

We’re forecasting that Latin American airlines will need more than 1,700 new airplanes valued at $120 billion over the next 20 years. So, like other dynamic regions of the world, it’s an exciting time here, not only for airlines, but for air travelers.

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Taking retirements into account, the Latin American fleet has grown by 175 airplanes over the last 8 years. In addition to fleet growth, we have also seen airlines replacing older generation aircraft - such as A300s, 727s, and DC9s - with newer generation aircraft.

Today, Latin America has some of the youngest airline fleets in the world. And, like some of those in the Asia-Pacific region, these leading airlines are among the most capable, fuel efficient, and environmentally progressive.

And something to watch for as we go forward - added capacity is giving the region’s carriers an operating scale they have never enjoyed before, enabling them to compete with the many U.S. and European carriers that serve the region.

I’d say that these trends really are the Wings of Change.

Comments (6)

Paulo M (Johannesburg, RSA):

The Latin American market is intensely focused on point-to-point services.

O mercado americano latino para o Boeing 747-tamanho e aeronave maior é muito pequena.

Interesting junction. One of your stronger future competitors, EMBRAER, is Brazilian based. Their Embraer 170 was No-9 on the Global Traveler "Best Aircraft Type" 2007 survey - ahead of the Airbus A320 (which has a significantly larger installed fleet).

In the future, I'd like to see more liberalizing of the skies between South America and Africa. We're two continents united by extreme natural beauty and diversity. The Rio de Janeiro harbour & Table Mountain in Cape Town, Angel Falls, Venezuela & Victoria Falls, Zambia & Zimbabwe, and so on. These places in our Earth continue to remain exceptionally beautiful, whatever the political climate.

Norman (Long Beach, California, United States):

I am glad to see Latin America back on the expansion
path after nearly two decades of airline failures and aging fleets. After seeing flagship carriers like Aero Peru, Ecuatoriana, VIASA, VASP, TAESA,
Faucett, SAETA, LAB, LAP, Ladeco, ACES, Southern Winds, Dinar, Azteca, Transbrazil, and others fail and as passenger 707 flew people well into the nineties, The Latin American market is back and new planes are needed as airlines are formed and expanded and Boeing has its share.

The orders have been very strong for Boeing in this
decade especially airlines like Gol with 38 + 161
orders, LAN Airlines with 40 787's, Aeromexico with
33 + 10 737-700, 6 737-800 and 10 787-8, Avianca Airlines with 20 787's, OceanAir with 10 787's,
TAM with 8 777-300ER's, VARIG with 20 737's on order, 10 767 on order and 4 777's on order.

As the market in Latin America has grown and has become more liberalised, discount airlines like Gol
have flourished and expanded as the need to travel has increased and become more affordable.

For the first time in the companies history, Airbus
has gained a strong foothold in Latin America with many A32S and A350's ordered. Even though Airbus is very strong in Latin America, the current long term
trend will keep Boeing in the lead.

Congrats on the orders for the 737,767,777,787 made in Latin America and also for Malaysia Airlines order for 35 + 20 737-800's and Iraqi Airways plans to order 30 737's and 10 787's.


G (France):

IATA international traffic data

Quote (emphasis added)
The exceptions were Africa, where a contraction in supply boosted the PLF by 2.1 percentage points to 67.4% and Latin America where strong economic growth and travel demand boosted load factors by 0.9 percentage points to 73.0%.

Global load factor fell, but it increased in Latin America and in Africa.

Paulo M (Johannesburg, RSA):

Those IATA figures say it all - or most of it anyway.

The RPK growth in Latin America is pretty astonishing. It's a sign that the region is bearing the fruits of sound economic management and properly executed sector decisions over some time now.

Africa can't match that right now because amongst other things, the economy simply can't support that kind of growth - yet. But (impressive) economic growth is there. Cutting back is the smart move - solely for survival reasons/profitability. But obviously bad for employment - that's why deep and painful structural changes are required.

Do the North American figures necessarily indicate that the US airlines' fortunes have improved? The North American figures show the second highest load factors, so that can only be a good sign - if the airlines manage well in the looming global trouble.

Hernan Saldana (Lima, Peru):

I am going to be at FIDAE on Saturday, so I can not wait to drop by Boeing's area to see what you guys are presenting. A shame that I will only have one day at the event.

I imagine that being Chile the home country of the only South American airline that has bought the Dreamliner, Boeing will take full advantage of that for its PR campaign.

I understand that IDS will showcase some of the fighters as well. I have been a huge fan of the F-15, so I am thrilled to have the opportunity to be near one of them for the first time.

I definitely can not wait until LAN recieves the first Dreamliner so I can enjoy the experience of taking a trip on such a wonderful airplane.

And I do hope you score some more orders for the 747-8 Intercontinental!!!!

Fabio Mendes (São Paulo, São Paulo, Brazil):

Good to see that somebody has an optimistic vision about Latin America's growth. No doubts the aviation industry is key for the region's future and will push infrastructure investments allowing Tourism (business and leisure) to be the engine of the continent success.

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