For real estate agents, the mantra is “location, location, location.” For Latin American airline executives, it’s “infrastructure, infrastructure, infrastructure.

"We are driving Ferraris on unpaved roads,” Latin American and Caribbean Air Transport Association (ALTA) executive director Eduardo Iglesias said. “We’re flying new, low-emission planes, but we still have to rely on the technology of the 1950s in terms of radar and air traffic control."

Iglesias’s sentiment was widely shared in November at the ALTA Airline Leaders Forum, the annual gathering of Latin American airline executives, in Nassau, Bahamas. Despite a slowdown in 2014—expected to continue into 2015 (particularly in Brazil)—in the rapid pace of growth experienced by the Latin American airline market in the last few years, the ingredients for robust, long-term passenger traffic growth are in place. A booming middle class, poor road connections and population masses in large metropolitan areas create a seemingly ideal climate for air travel growth. And consolidation has created several large, financially steady airline companies—LATAM Airlines Group, Copa Holdings and Avianca Holdings—with relatively young aircraft fleets that should be able to drive growth.

Latin American airlines reported a 6.5% year-over-year traffic increase on a 6% capacity rise in October, according to IATA. Only Middle East airlines grew faster.

However, the region’s airlines continue to push Latin America’s governments to invest in airports, modernize ATC and streamline regulations, fearing that a lack of infrastructure will stifle the region’s strong growth potential.

“The issue of air traffic management in the region has actually improved considerably over the last 10 years … particularly on routes to North America and Europe,” IATA regional VP-Americas Peter Cerda said, though he cautioned there are still countries with serious ATC issues, such as Argentina. But even with these improvements, airport infrastructure remains a problem. “We can improve the upper airspace, but if we don’t improve the airport infrastructure, there are going to be bottlenecks,” Cerda explained.

Iglesias said, “In Latin America, the main hubs—with the exception of Panama City—are not delivering the space we need.” He also emphasized that ATC improvements in Latin America are relative and inconsistent throughout the region. “Everyone thinks of infrastructure as airports, but that’s not all it is,” Iglesias said. “We’re talking about ATC, customs and immigration. We have a huge lack of investment in aviation infrastructure in Latin America.”

Even with the concerns about infrastructure, Airbus and Boeing remain bullish on Latin America. Airbus stated in a market forecast released in November that Latin American passenger traffic will grow at annual average rate of 4.9% over the next 20 years, which would be slightly above the forecasted world average.

Megacities

Airbus president-Latin America and the Caribbean Rafael Alonso pointed out that 83% of the region’s population will live in “megacities” by 2033. As a result, he said, there is enormous growth potential both for low-cost carriers (LCCs) operating within the region—currently, almost all of the LCC traffic in Latin America is in Brazil and Mexico—and for Latin American airlines to capture a much higher percentage of long-haul traffic to/from the region.

Airbus is projecting that Latin American and Caribbean airlines will require 2,294 new passenger and freighter aircraft valued at $292 billion over the next two decades. The bulk of those aircraft (1,784) will be single-aisle passenger aircraft, Airbus predicted.

Boeing is even more bullish, projecting a need for 2,950 new commercial aircraft valued at $340 billion in Latin America and the Caribbean through 2033. Boeing agrees with Airbus that about 80% of deliveries will be in the single-aisle market.   

But all of the growth, the region’s airlines point out, is predicated on government support.