ALTA presents Peru Aviation Insight

Lima, June 19, 2024 - Peru's commercial aviation market recorded a total demand of 23 million passengers in 2023, a 16.6% increase from 2022. However, this figure is still 3% below pre-pandemic levels, indicating that Peru is lagging behind neighboring countries. This data is highlighted in "Peru Aviation Insight," a statistical compendium of the Peruvian civil aviation market prepared by the Latin American and Caribbean Air Transport Association (ALTA) using data from the civil aviation authority, airlines, and Amadeus Travel Intelligence.

"In the last 15 years, the country's passenger traffic has almost tripled. Its potential is enormous, but strong and agile measures must be taken to meet the latent demand," says José Ricardo Botelho, executive director and CEO of ALTA.

To be more competitive, the country must, among other factors, review its operating costs, which are currently considerably higher than key markets in the region such as Chile, Brazil, Mexico, and Panama, says Botelho.

Peru has positioned itself as the sixth largest aviation market in Latin America in terms of Available Seat Kilometers (ASK), representing 4.5% of total capacity in the region. 

In 2023, the Andean country had a total capacity of 28.4 million seats. It transported 13.7 million passengers in the domestic market, which has grown by an annual average of 9.4%. 

Internationally, since 2009, the market has grown at an average of 4.5% annually, reaching 9.4 million passengers in 2023, an increase of 24.2% over the previous year.

This growth significantly contributes to the country's economy, as aviation is a powerful engine that generates direct, indirect, and induced jobs, social and economic development opportunities, and attracts people to explore the beauty of Peru. "In 2023, 2.5 million international tourists visited Peru, with more than 62% arriving by air. We must work together - industry and authorities - to secure the foundations to attract more people to this jewel of South America", says Botelho.

However, Peru's air traffic is still lagging. One reason is operating costs, as an international operation in Peru is significantly more expensive than in Brazil and Chile, which directly impacts airlines' cost structures. 

"While in Peru a two-hour turnaround in a narrow-body aircraft with a maximum take-off weight (MTOW) of 78 tons costs 6, in Brazil the cost is 9. This price gap highlights the higher financial burden faced by airline operations in the Inca country compared to their regional peers, which may influence strategic decisions in the airline industry," explains José Ricardo Botelho.

In addition to high operating costs, passenger taxes and fees in Peru, both for domestic and international tickets, contribute significantly to the high cost of air service, discouraging passenger demand, says the ALTA report.

"Compared to other countries, Peru stands out for having one of the highest levels of fees and taxes for international flights. For domestic flights, more than 30% of the final ticket price consists of these additional charges. This panorama not only affects the accessibility of air transportation for citizens but also has negative repercussions on tourism and the local economy," adds Botelho.

To improve these aspects, ALTA's CEO argues that it is necessary to analyze government policies and sector regulations in detail, as well as to consider reforms to improve the competitiveness and accessibility of Peru's air transportation, a process in which ALTA can collaborate.

"We welcome the development by ALTA of the report 'Peru Aviation Insight,' which comprehensively covers the evolution of air transport in our country. It will serve as a mandatory reference for analysis, detailing the challenges ahead to improve connectivity and recover the traffic levels of 2019. Additionally, we must address regulatory challenges, particularly the impact of fees and taxes on ticket costs, placing us third among countries in the region with the highest impacts in this area, affecting our competitiveness. There are also significant infrastructure challenges nationwide. Much work remains to make aviation accessible to more people at reasonable prices, expanding connectivity, and this report will be a very useful tool in achieving these objectives," explains Carlos Gutierrez, General Manager of AETAI.

Lima: The Center of Air Traffic

Lima International Airport was the fastest-growing air terminal in Peru in terms of seat capacity and passengers boarded during 2023. It registered 16.3 million available seats (791,000 additional) and 13.2 million passengers (1.4 million additional) compared to 2022, according to "Peru Aviation Insight."

This airport was also the top performer in Peru's domestic market, followed by Cuzco International Airport with 3.7 million seats and 3 million passengers in 2023. Throughout last year, Lima was the main hub for international travelers to and from Peru, with more than 472,000 passengers connecting during the year.

Indeed, the Lima - Santiago de Chile route was the city pair with the highest traffic in Peru's international market, with 1.3 million passengers and 1.7 million seats offered in 2023. The route had an occupancy factor of 73%.

In terms of international capacity, 69% consisted of traffic within Latin America and the Caribbean. North America was the largest extra-regional market to and from Peru, with more than 2.2 million seats in 2023, accounting for 19% of Peru's total international seat capacity.

"It is interesting to note that Jorge Chávez International Airport (LIM) is the fifth busiest airport for connecting passengers in Latin America and the Caribbean, after PTY, GRU, BOG, and MEX, with an average of 5,000 international connecting passengers per day. Its role in intra-regional connections is particularly important, but it still has many opportunities for improvement in air infrastructure. Specifically, according to the results of the most recent ALTA-Amadeus Competitiveness Index, for the infrastructure pillar, Peru ranks 18th among the 20 countries evaluated," highlights ALTA's CEO.

The recent failure of the runway lighting system, which led to the total closure of airport operations for 10 hours, affected more than 200 flights, and thousands of passengers were diverted to other bases. In this regard, ALTA, a non-profit organization dedicated to the development of air transport in the region, has made a strong call to the Peruvian aeronautical and airport authorities to strengthen technical collaboration between all public and private actors to ensure not only the necessary advances in infrastructure but also effective contingency plans for potential future events.

In the most recent ALTA-Amadeus Competitiveness Index, Peru ranked eighteenth in terms of air transport infrastructure. More than 60% of its flights operate in congested airports, which limits growth.

"Public investment in this sector has been low in recent years, with just 0.08% of GDP invested on average. This limited investment negatively impacts the expansion and modernization of Peruvian airports. There is an urgent need to increase resources and improve management to enhance the development of air transport in the country," says Botelho.

In Peru, aviation contributes more than US .4 billion to the national economy and more than 36,000 direct jobs. "Together, we can pave the way for efficient and sustainable growth that generates benefits for the country and ensures an essential service for thousands of people," says ALTA's CEO, who recalls that aviation is a driving force for the national and regional economy.

For more details and full access to the "Peru Aviation Insight" report, please visit ALTA's website.