An old saying born even before commercial aviation was even a daydream in the mind of the visionaries was attributed to Baron Rothschild, a 18th-century nobleman and member of the Rothschild banking family: “The time to buy is when there’s blood on the streets.”
American Airlines’ move on JetSMART seems to take advantage of a similar consideration: after a crisis that is bound to reshape the commercial aviation industry worldwide, there are some tactical and strategic moves that needs to go through in order to at least consolidate the position that carriers had just before 2020. In some cases, that position was to accommodate resources to ensure survival.
After LATAM-AA deal failed, it was a matter of time for American to look for opportunities in South America to confront the new joint venture that the Chilean-Brazilian holding created with Delta. AA’s partnership with GOL was a move in the right direction on one of the region’s biggest markets, but South America does not start and finish in Brazil. There are other markets that were up for grabs, and they became even more palatable after LATAM’s Chapter 11 filing.
LATAM left the Argentinian domestic market in 2020, with the pandemic as ultima ratio but after losing hundreds of millions in 2018 and 2019. The holding’s strategy to reinforce the operation of the international hubs -now boosted even further with the consolidation of the widebody fleet under the Brazilian subsidiary operating in Sao Paulo- left behind a good amount of domestic connections in several national branches that were suddenly unattractive for the company. There’s the primary target of JetSMART: to fill in the gap that LATAM has opened. There´s a domestic share that can be taken with relative ease.
JetSMART’s reach in South America is gradually expanding and its share in domestic destinations is bound to grow, despite the dynamic competition in the low-cost segment it faces in Chile and a lesser resistance in Argentina and Perú. The company is planning to grow in Brazil and Paraguay and Indigo Partner’s support makes it a key regional player in the years to come.
While there are questions about how an ULCC will operate cohesively with a legacy carrier, but in an industry that was aiming to blur the lines between business models even before COVID hit its flotation line, customers will overlook the differences if other key factors are well covered: punctuality, reliability, confidence. South America’s market is about to see a significant change as an actor that was bound to slowly grow into a giant has found a big jar of steroids.
