Volaris dominates low-cost air market
Competitors close routes and adapt prices for low occupancy
Low-cost airlines have enabled 64% more seats in the last year.
“Our main objective is to strengthen the regional market, from there we will drive other routes,” said Fernando Naranjo, general manager of Volaris Costa Rica”
Volaris is sweeping the low-cost air market, to the point that today it is consolidated as the only alternative of this type of flights within Central America and some places in the United States and Mexico. This Aztec capital company arrived in Costa Rica in March 2016 with an aggressive strategy, however, it started operations in November when it obtained its air operator certificate, to offer the San José-Guatemala City route, less than $ 60 one way , with taxes included. The tactic was so successful that its effects are already felt in the competitors, who have been forced to close some of their routes for low occupancy.
Wingo, a subsidiary of Copa Holdings, was one of the most affected: in January it canceled the flight San Jose-Guatemala, which offered for less than $ 100. Recently, it was announced that as of October 21 it will not continue offering the San José-Panama route. This decision was made due to a decrease in the number of passengers per trip. “Our flag is compliance, quality and low prices; for this reason since Wingo we decided to focus on routes with greater demand for our type of product, “said Catalina Breton, spokeswoman for the company. Read more: “Low cost agitates aeronautical market” However, Copa, its parent company, will keep the daily frequencies to that destination, as well as the Guatemalan capital. Another of the affected was the Central American Economic Flights (VECA), which was forced to close its operations at the beginning of the year; although never confirmed, would have canceled its services due to an internal financial crisis. VECA only survived two years in the market. On the other hand, domestic Costa Rican airlines do not have the operational capacity to compete with the alternatives offered by the market. This situation leaves Volaris Costa Rica as the only low-cost carrier currently flying to the Isthmus capitals. The company seeks to consolidate the Central American market but plans to expand with a new frequency to Tijuana, Los Angeles, New York, Peru and Colombia. Recently, the United States granted the permits to this airline to make flights to that region. Volaris does not consider that a monopoly is being created, but the same market situations and commercial plan have led them to this point. “In the coming years there will be more competition, new low-cost lines will appear that agitate the Central American market; the competition is very good because in the end the beneficiary will be the passenger, “said Fernando Naranjo, general manager of Volaris Costa Rica. In fact, the demand for these flights has increased since 2016: for that year the occupation was of 708 thousand passengers, whereas a year before it was hardly of 432 thousand, according to data of Official Guide of Airlines in a report realized for the Costarican Institute of Tourism.
The previous figure represents a 64% increase in the number of seats available. By the end of 2017 operations of this type of flights are expected to represent 20% of the annual total. Other companies of this type are Interjet, Alaska Airlines and Southwest, which sometimes use Costa Rica as a destination. Traditional airlines flying to some of these destinations, assure that the “low-cost” trend is not harmful to the market, as long as they are in the same conditions. However, and despite pursuing different audiences, these companies do not look away from their competitors. “The tourist who flies with an inexpensive airline usually seeks leisure or adventure, we pursue a corporate traveler and do not consider the price as a preponderant factor when choosing an airline, although this does not mean that we do not follow the another niche, “said Enrique Sandoval, commercial manager of Aeromexico. Central America is an important market for low-cost airlines and in general for airlines: at the end of June, just over 247 thousand tourists left for Costa Rica; while some 391 thousand passengers landed on national soil. Nicaragua is the country that brings the most visitors to Costa Rica, while most departures from our nation are destined for Panama. “The trend of low cost came to revolutionize the market in an accelerated way, that is why consolidated airlines bet by the added value to convince an increasingly demanding user, direct flights are a valid option but will depend on the needs of the market” , commented Pablo Gomes, commercial manager of Avianca. Costa Rica has the capacity to attend to this wave of visitors: recently the migration authorities have enabled a pilot plan with which it is intended to expedite the process of entry and exit of visitors to the country, through a unique digital system for each user. In addition, the Directorate of Civil Aviation, together with the managing entities of the airports Juan Santamaría and Daniel Oduber of Liberia, invest in protocols to guarantee the safety of the operations. Airlines, for their part, will continue to conduct market research to determine which strategies to take or which routes are most in demand, as they recognize that the profile of travelers has changed; so retaining and retaining customers is becoming more difficult
Why is it important to have a presence in the Central American market? Because it moved more than 600 thousand tourists in six months, that is the niche to which the low-cost airlines point. This is the breakdown of visitors by country (figures in thousands of travelers to the first half of 2017):
The trend of low cost or ultra low cost grows like foam in Costa Rica because it offers a series of competitive advantages.
• Price With these companies it is possible to travel to different capitals of Central America for less than $ 120 round trip, with taxes included
• High frequencies Flying several times and with a variety of schedules a week makes it more attractive to use the “low-cost”
• Direct travel A low-cost airline does not offer flights with a stopover, which is beneficial for the traveler because it will arrive faster to its destination
• High occupancy rate Normally, these trips have a occupancy rate of over 90%, which is profitable for the companies that offer them
• High traffic These flights transport the fifth of tourists arriving or departing from Costa Rica each year