Alice N. Sanders
0
All posts from Alice N. Sanders
Alice N. Sanders in US Markets,

U.S. airlines bet big on Latin America

Now boarding: Flights to Latin America.

U.S. airlines are betting big on Latin America and the Caribbean.


A strong dollar has made overseas travel cheap for Americans. At the same time, a burgeoning middle class in Latin America has more cash to spend in the U.S. These factors are helping stir up travel between the two regions.

On Thursday, Southwest Airlines (LUV) opened a new international hub in Houston with plans to double the number of its destinations to 12 by year's end. The airline has plans to add even more next year, according to a Southwest spokesperson.

Southwest isn't alone. Since the end of 2010, JetBlue (JBLU) has nearly doubled its destinations in the region from 19 to 35. And Spirit (SAVE) airlines also plans to increase the number of flights to the region this year.

"Latin America is definitely one of the fastest growing areas," for airlines, says Jim Corridore, an airline analyst at S&P Capital IQ.

It's not just the beaches

A few factors -- besides beautiful beaches -- are driving the push by U.S. airlines into the region.

First, the location. Much of Latin America is closer than Europe, Asia and Africa. That's a cost saver for the airlines -- they don't have to buy bigger aircraft that go longer distances.

Another key factor is Latin America's growing middle class. Their ranks have grown by 50% during the 2000s, with millions moving out of poverty across the region, according to the World Bank.

Latin Americans have more cash and want to spend it traveling to the United States, airline experts say.

"They want to fly to the United States ... that's the aspiration for every Latin American," says Catalina Breton, director of international planning at JetBlue.

Breton says Jetblue's Latin America business makes up about a third of the company's revenue.

Better time for American travelers

The timing couldn't be better...for American travelers at least. Americans going to Colombia, Mexico or Peru will get more local currencies for their dollars. Those countries' currencies have fallen 18%, 11% and 8% against the dollar so far this year, respectively.

Most Latin American economies are expected to shrink this year. Its biggest player Brazil is currently in the grips of a recession.

Breton of Jetblue said fares were down this year in Latin America due to lack of demand from Latin American travelers. However Breton says the airline is in there for the long haul.

As the U.S. airline competition builds domestically, some see their best bet on growth outside the country.

"As it becomes harder to find areas domestically to be able to implement their strategy, it's natural for them to look overseas," says Corridore, the airline analyst.

CNNMoney (New York)