Airline Competition on Latin American Routes Begins to Soar : Transportation: Carriers are pushing into each other’s home turfs while Latin governments ease rules that choked off competition.

Airline travel to Latin America has been regarded by many as an adventure in itself, with infrequent and costly flights, aging planes and service marred by unscheduled stops and meals that run out before all passengers have been fed.

But that reputation--much of which is undeserved--is changing fast.

U.S. and Latin American airlines are pushing into each other’s home turfs with price cuts and improved service while Latin governments relax once-tight regulations that choked off competition. The results have been fare wars to Ecuador, nonstop service from Los Angeles to the Amazon and a glut of seats to Central America.

“They see it as a growth market,” said Lee Howard, chief executive of Airline Economics, a Washington-based consulting firm. “It’s not the boomer right now that the Pacific is, but in time they certainly will see it grow.”

The growth of trade and immigration between the United States and Latin America and highly profitable routes have lured U.S. airlines into the region, despite potential pitfalls.

Last month, American Airlines, which has aggressively expanded the Latin American operations it purchased from bankrupt Eastern Airlines a year ago, said it will increase flights into the region by more than 20% this fall. Meanwhile, rival United Airlines applied for permission to fly routes to Brazil under a treaty that opened up the region’s largest country to more U.S. carriers.

A recent bidding war for Pan American World Airways was triggered in part when United Airlines sought to buy the bankrupt carrier’s lucrative Latin American routes. But United lost out to Delta Air Lines, which will own 45% of a shrunken Pan Am serving primarily Latin America.

The government regulations that ensured Pan Am profits on Latin American routes are fading. But enough rules remain in place to shield carriers on those routes from cutthroat competition often found over the deregulated skies of the United States.

The high proportion of first-class travelers, as well as the large numbers of passengers who regularly visit family and friends, make for routes that are more lucrative and stable than those dominated by price-conscious and skittish tourists.

“They tend to go back to their countries no matter what happens,” says Peter Vittori, Latin American regional sales manager for American Airlines.

The tourist trade, however, is one market that U.S. carriers hope to build. American Airlines is spending $20 million this year to advertise its Latin routes and has begun to educate its workers about the region.

But the airline concedes that it faces a hard time persuading tourists to visit some unpopular destinations such as Colombia, whose natural beauty has been overshadowed by the notorious drug trade.

“It’s a tough sell,” Vittori said. But “I think the Latin American market is sorely misunderstood.”

If anyone can boost traffic to Latin America, travel agents say it is American, United and Delta. All three have the financial and marketing muscle--as well as the quality of service--needed to stimulate travel into the region, they say.

“U.S. travelers feel much more comfortable on a U.S. flag carrier than a foreign flag carrier,” said Thomas Nulty, president of Associated Travel Management, a Santa Ana travel agency. “When Eastern and Pan Am were the dominant U.S. carriers going down there, neither of them were operating the greatest service either.”

Latin American airlines, however, are not standing still while more U.S. jets land on their home runways. Many of them already boast world-class service and are counting on national loyalty to help retain passengers as they expand abroad.

Brazil’s Varig--the largest carrier in Latin America--has expanded its U.S. destinations. It began new service between Los Angeles and Manaus on the Amazon earlier this year and is scouting for another U.S. destination. In addition, two other Brazilian airlines have announced plans to fly to the United States.

“Our traffic is predominantly Brazilian traffic, and we have held on to that share pretty well,” said Werner Legiehn, Varig’s commercial manager in Los Angeles.

The growing competition between U.S. and Latin American carriers has already brought about noticeable changes, travel agents say.

Loly Vera, who owns a Los Angeles travel agency catering to Latin American travelers, recalled that a round-trip ticket between Los Angeles and Ecuador had long been a standard $700. Then American Airlines introduced a promotional $599 fare, and “everybody started doing the same thing,” she said.

Passengers also appear to be receiving more attention from Latin American carriers, says Manuel Graniel, a Los Angeles travel agent. While service was good overall, Graniel heard too many stories of South American-bound planes leaving without enough food and of passengers that were abandoned at the gate by overbooked carriers.

Now, Latin American carriers “want people to know that they are giving as good service as the foreign carriers,” said Graniel, who noted the addition of complimentary wine for adults and special discounts for children. “Passengers didn’t have a choice before. Now, if they don’t like the airline, they can change.”

But the stiffer competition has caught many smaller Latin carriers unprepared.

“The Latin carriers, almost without exception, are weak in financial terms and in their abilities to compete for the bulk of the traffic,” said Paul Turk at Avmark, an airline industry consulting firm. The small carriers “can’t get new airplanes because they can’t afford them.”

In Central America, deregulation has flooded the market with more than 1,000 seats a day from the United States, said Roberto Pena, district sales manager in Los Angeles for Taca Airlines of San Salvador.

“That’s too many seats on a daily basis to Central America,” Pena said. “Sometimes planes are not even flying at 50% capacity.”

Some analysts say the situation may prod governments to tighten regulations again to protect their national carriers. But that “would go against the grain of what is happening all over the world,” said Abel Beltran-del-Rio, president of CIEMEX-WEFA, a consulting firm focused on the Mexican economy.

“Ten years ago, it was a kind of a point of national pride to have a national airline,” Beltran-del-Rio said. “But now, in order to be the true pride of the country, it has to be able to compete in the big leagues.”

Air Travel Takes Off Air travel between the United States and Latin America is steadily rising. Below are figures for Latin America-bound passengrs leaving from U.S. airports. Number of passengers (In millions) ‘85: 4.6 ‘86: 5.0 ‘87: 5.7 ‘88: 6.2 ‘89: 6.4 ‘90: 7.3 Source: Immigration and Naturalization Service

Flying South Foreign airlines still fly most Latin American travelers departing from key U.S. airports. Passengers to Mexico and Central America* From Los Angeles: U.S.airlines share: 37% Foreign airlines share: 63% From Miami U.S.airlines share: 54% Foreign airlines share: 75% From New York U.S.airlines share: 25% Foreign airlines share: 75% Passengers to South America* From Los Angeles Foreign airlines share: 100% From Miami U.S.airlines share: 47% Foreign airlines share: 60% From New York U.S.airlines share: 40% Foreign airlines share: 60% *On nonstop international flights