Strategic Plan to Support Air in the SAM Region Connectivity.pdf · 3.3. SWOT analysis of air...

StrategicPlantoSupportAirTransportintheSAMRegion

ConnectivityModule

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TableofContents1. ExecutiveSummary

2. Definitionofconnectivity2.1. WhatisConnectivity?2.2. Howcanitbemeasured?2.3. Importanceofconnectivitydevelopmentanditssocio‐economicimpact2.4. Whatfactorsdetermineacountry’sdegreeofconnectivity?

3. Socio‐economic conditions and situation of the aviation industry in the SAMRegion3.1. Generaldescription3.2. Industryandairconnectivity3.3. SWOTanalysisofairconnectivityintheSAMRegion

4. Socio‐economicconditionsandsituationoftheaviationindustry,byState4.1. Generaldescription4.2. Industryandairconnectivity4.3. SWOTanalysisofairconnectivity,byState

5. VisionofAviationIndustryconnectivitydevelopmentat2035

5.1. SAMRegionairconnectivityoptimizationapproach5.2. MainfiguresandcharacteristicsofairtrafficintheSAMRegion5.3. TheSAMRegion’scurrentconnectivitylevel5.4. Projectedpassengerandcargotrafficat20355.5. Developmentstrategies5.6. LinkbetweentheUnitedNationsSDGsandICAOSOs

6. TacticalmeasurestooptimizeSAMRegionconnectivity6.1. Generalframework6.2. Objectivestobeachieved6.3. Principalmeasures,specificactivitiesandcompliancemetrics

7. AnnexesA–HistoricaldataontotalpassengersintheSAMRegion,byStateB–Directnon‐stopinternationalroutesfromairportsregisteredwithICAOC–Airlinesthatoperatedirectflights‐SAMRegionD–DetailedexplanationofthecalculationofpassengerandcargoconnectivityindicesE‐Totalpassengerprojectionfortheperiod2016‐2035,byState

8. Bibliography

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1. ExecutiveSummary1.1. Whatisairconnectivity?

Theability to link‐up theworld’s cities and countries for thepurposeof transportingresources(passengers,cargoandmail)fromoneterritorytoanother.Itallowsfortheoperation of a competitive global market. The more liberalized and integrated theglobalairconnectivitynetwork,thegreaterthelong‐termbenefitsforalloftheworld’sinhabitants.ByICAO’sdefinition,“connectivityisisacharacteristicofthenetworksandcanbedefinedinsuchawayastoconstituteanindicatorofanetwork’sconcentration.”

1.2. Howcanitbemeasured?

Whilethereisnospecificwaytomeasureconnectivity,airconnectivitycanbegaugedintermsoftwonetworkcharacteristics:

(i) Sizeandconcentration:Themore routes and frequencies that exist, the greater the possibilities for aState’s connection. Even so, it is the use of that capacity for connection(passengers, cargo and mail) that will determine a nation’s true degree ofconnectivity.

(ii) Seamlessness:Moredirectrouteswiththesmallestpossiblenumberofconnectionsfacilitateairtraffic. Embarkation, disembarkation, immigration and security controls andairportconnectiontimesallplayapartinthequalityofconnectivity.

Existingliteratureonaviationadvocatesavarietyofindicesormetrics1thataccountfordifferent connectivity characteristics that can be used individually and/or incombinationtoprovideabetterunderstandingofeachcountry’s/region’sconnectivity.Inasmuch as measuring connectivity is a complex process that incorporates bothquantitative and qualitative factors, any individual measurement will serve forreferencepurposesonlyforitfailstofullyincorporateallrelevantaspects.1.3. Importanceofconnectivitydevelopmentanditssocio‐economicimpactAccording to the ATAG (Air Transport Action Group), in 2015, a total of3.6billionpassengers(40%internationaland60%domestic)and51.2milliontonnesofcargowere transported. There is a network of almost 53,000 routes operated by over1,400airlinesthroughcloseto4,000airports.

Socio‐economicbenefits:In the current context of globalization and commercial openness, a country with nopolicy for developing adequate connectivity reduces its opportunities for economicgrowthanddevelopment.While it isdifficult togauge the true impactof theaviationindustryontheglobaleconomy,itsbenefitsgobeyondthedirectconsumerstoimpactthestrengthsofeachnationaleconomy.Themainbenefitsofaviationare:

ItenhancesGDPandcreatesmoreemployment

1“AirConnectivity:Whyitmattersandhowtosupportgrowth”–PwC,HayleyMophetandClaudiaBottini(2014)

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Charts1.3.1:GlobalimpactoftheaviationindustryonGDPandthecreationofemployment

Source:ATAG

Spheresofimpact(GDPandemploymenDirect: Airlinesandairport

servicesIndirect: Aviationindustry‐

relatedprovidersandservices

Induced: Localbusinessesbenefitedbythepurchasingpowerofdirectandindirectemployees

Catalysts: Tourism,internationalairtradeandanyotherbusinessthatexiststhankstothepresenceoftheaviationindustry

‐Direct;‐Indirect;‐Induced;‐Catalysts(tourism) Employment(millionsofjobs):62.8millionJobs

GDP(inUS$trillions):US$2.7trillion

Itpromotesinfrastructureinvestmentanddevelopment AirportsinvestedUS$37billioninprojectconstructionin2014. Each US$ 100 million invested in air navigation technology research anddevelopmentisestimatedtoproduceanadditionalUS$70millioninGDPperyear.

Becauseofitscatalyticeffectondifferenteconomicsectors,theindustryalsobooststhe three branches of State investment (foreign and public and private domesticinvestment).

Itraisesproductivity

Companiesoperateinaglobalmarket,specializeinactivitiesinwhichtheyaremostefficient, accede to economies of scale, and benefit consumers with a variety ofproductsandmorecompetitiveprices.

The aviation industry facilitates the operation of transnational enterprises thatlocate their facilities, personnel anddistribution logisticswhere they canbemostproductive.Itcreatesemploymentintheeconomiesinwhichitoperates.

Itpromotestechnologicalinnovationandsustainabledevelopment Highly technological activity; requires continuing investment in innovation,promotes university research and development departments and fosters thetrainingofhighlyqualifiedtechnicians.

Activecommitmenttoinvestinnewtechnologytofightclimatechangeandat2050toreducetheaviationindustry’scarbonfootprintby50%ofnetemissionlevelsin2005.

Itfacilitateslabourmobility(boostsremittances)

Individualscanseekbetterjobopportunitiesineconomicandqualitativeterms. They send part of their income earned abroad tomaintain their families in theircountriesoforigin.

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Taxcollection Theincomeofworkersintheaviationindustryandotherrelatedsectors,companysocial securityand income taxpaymentsand, in somecountries,VATchargedonairfaretickets,etc.contributetotaxcollection.

Itconnectsremotetownsandvillages

Bestoronlytransportalternativefortownsthatareremoteordifficulttoreach. Acitywithoutcommunicationsorconnectivitywouldfailtoshareintheprogressorsocio‐economicdevelopmentofthecountryorregionorwouldnotenjoysufficientaccesstobasiceducationandhealthservices.

Itallowsforhumanitarianemergencyaid

Incasesofnaturaldisastersorwarsrequiringurgentassistance,air transporthasproventobethebestalternativefortherapidandeffectivetransferofmedicalandrescue workers, evacuation of the wounded and transfers of donated medicines,clothing,foodsandotherpriorityneeds.

1.4. Whatelementsdetermineacountry’sdegreeofconnectivity?

Air‐groundsafety

Withoutsafety,therecanbenoairconnectivity;airlinesandgovernmentsattributepriority to flight safetycontrol for strengthening the industryandconnectivity inthelongterm.

Touristattractionsandpotential

Thegreaterthepotential fortourismanditsdevelopment,thegreatertheinterestandbenefitinestablishingdirectroutestosuchdestinations.

Businesspotential

Greater connectivity will depend upon potential and existing trading relationsbetweenthelocaleconomyandtheworld’sothercities.

Themorediversifiedandprosperousthelocaleconomyisseentobe,thegreatertheinterest in creating a wide‐reaching connectivity network within the region andwithothercontinentsormoredevelopedeconomies.

Airportinfrastructure

Thedevelopmentofacity’sconnectivitycannotbeboostedwithouttheexistenceofappropriateinfrastructureforsustainingtheadditionalflow.

The technology that is applied and the complexity of the processes (check‐in,customs,immigrationandsecurity)canalsoaffectthenetwork’sseamlessnessandtheopportunitytomakeuseofsomeairportsasregionalhubs.

Geographicsituation Each State’s individual geographic characteristics can influence its decision and

need to create a more or less concentrated internal and external air transportnetwork.

Acityorcountry’sstrategicpositioningintermsoftheworld’sothereconomiesiscapableofpromotingtheuseofitsterritoryasahubforotherdestinations.

Technologicalinnovation

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Continuousdevelopmentoftechnologyinairnavigationsystemsandinnovationsinaircraftdesignenhancessafety levels,makes itpossible toreduceoperatingcosts,and expands flight offerings in longer‐haul (distances) and larger capacity(passengers)aircraft.

Airlinebusinessmodel

Low‐cost carriers have boosted greater connectivity on short‐haul routes andincreasedaccessbylower‐incomepopulationsegments.

Loyaltyandfrequentflyerprogrammespromotegreatercustomerconsumption. Commercial cooperation agreements make it possible to jointly operate routes

wheretheentryofasingleairlineisnoteconomicallyviable.. Regulatoryliberalization

Crucial factors in a State’s level of air connectivity: Bilateral and multilateral airservices agreements (ASAs) between and among countries and foreign relationsstandardsandregulations.

Many countries have liberalized their regulations in recent years, but limitationsstillexist: casesinpointaretheentryofforeigninvestmentandthecomplexityoftheprocessesandproceduresforobtainingvisas,amongotherthings.

1.5. Socio‐economicsituationoftheSAMRegion

TheSAMRegionismadeupprimarilyofrawmaterialsexporters.Itisoneoftheworld’smost socially, culturally and demographically diverse regions. It also varies hugely ingeographictermsandhasawiderangeofclimatesandaltitudescontainingatotalof81ofUNESCO’sWorldHeritagesites. Asa result, itpresentsanalluringandvariedofferingthat attractsmanydifferent typesof tourists and investors. WorldBank figures revealthatthenumberofpassengerstransportedintheregionhasmultiplied3.5‐foldoverthepast20years(foranannualaverageof7.9%).Charts1.5.1–PopulationandGDPdistributionbycountryPopulationdistributionbycountryin2015 GDPDistribution(PPP)in2015

(millionsofinhabitants) SAMRegionBrazil204…Ecuador16…Others28Brazil48%...Peru6%...Others7%

Totalpopulation:422millioninhabitants

TotalGDP:US$3.6trillion(4.9%oftheglobalGDP)

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Source:IMF(InternationalMonetaryFund).UNdata(UnitedNations)forthecaseofFrenchGuiana

Figure1.5.2–MapoftheSAMregionbyincomelevel,as

classifiedbytheWorldBank

LEGENDHIGH‐INCOMENATIONS:LOWERMIDDLE‐INCOMENATIONS:HIGHERMIDDLE‐INCOMENATIONS:UNCLASSIFIEDNATIONS

Source: WB(WorldBank).

1.6.TheaviationindustryintheSAMRegioninfiguresTable1.6.1–GeneralinformationabouttheaviationindustryintheSAMRegionGDP–travelandtourism* US$134billionEmployment‐travelandtourism* 5.4millionSpendingontourism US$63.1billion

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AccordingtodatasuppliedbyIATA,atotalof198.4millionpassengersweretransportedfrom/toandinsidetheregionin2015.Ofthese,Brazil,Colombia,ArgentinaandPeruhadtheheaviestpassengertraffic,accountingforover75%ofthetotaltrafficthatyear.Traffic over the past year increased barely 1.2% in the SAMRegion, duemainly to theslowdown of traffic in Brazil (‐2.6%) and Venezuela (‐14.8%). It should be noted,however, thatgrowthduringthepreviousyearssurpassed7%(except in2014,whenitrose3.2%),placingitsannualaverageforthe2010‐2015periodat7.2%.Destination‐wise, 70% corresponded to domestic traffic inside each State, 8% to intra‐regionaltrafficamongtheSAMStatesandtheremaining22%tointernationaltrafficwithotherworldregions.

Charts1.6.2–AirtrafficevolutionintheSAMRegion

Evolutioninthenumberofpassengers Annual traffic growth in 2015 vs. 2014 andaverageannualgrowthin2010‐2015,byState

Millions‐Internationalpassengers;‐domesticpassengers;‐2015vs.2014‐Averagefor2010‐2015

Peru;….Panama;SAMRegion;Brazil;…Suriname;…FrenchGuiana

Source:IATA.Preparation:In‐house

Charts1.6.3–Compositionandannualgrowthofthepassengertraffic,byState

Totalpassengers 198.4millionAirports >300(106international)Aircarrieroperators >80Countriesofdestinationwithdirectroutes

67(52non‐stopconnections)

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TrafficdistributionintheSAMRegion,byStateTrafficdistributionintheSAMRegion,bydestination

Brazil;…Peru;…Panama;Others4% 78%ofthetrafficisdomesticandinternationalwithintheSAMRegion

Domestic70%;International22%;SAMRegion8%;

Source:IATA.

1.1. SituationandlevelofconnectivityoftheSAMRegion

ThecharacteristicsoftheSAMRegionintermsofitslevelandqualityofairconnectivityare(seesection5forfurtherdetails):

Brazil is the most connected country as to number of airports, air carrieroperators and direct routes. It also accounts for almost one‐half of the region’stotal air traffic. Nonetheless, considering the large size of its territory and itspopulation, its relative level of connectivity is smaller. Not all of its territory isadequatelyconnected(itsairportdensity is lowerthanthatofmostcountries intheregion;seesection5.3forfurtherdetails)anditstillshowsconsiderableroomforfurtherdevelopmentofitsairtrafficdecentralization.

Regionalairportdensity,measuredasthetotalnumberofairportsperonemillioninhabitants, is below1 in 9 of the14 States. According to theWorldEconomicForum (WEF), over one‐half of the 140 countries evaluated in its “Travel andtourism competitiveness report 2015” have an airport density of over 1. ThatsituationrevealsthatasizeablenumberofStatesintheregionstillhaveroomtoimprovetheamountofinfrastructureavailableforconnectingtheirpopulations.

IntermsofnumberofflightsandofpassengerscomparedwiththepopulationsizeandGDP,theSAMRegionranksmidwayamongtheworld’sregions.Itslevelofaircargo transported in comparison with its GDP, however, is among the world’slowest.Proofofthissituationisthefactthat,accordingtoBoeing,theSAMRegiontodayaccountsforlessthan2%ofthetotalairtradeoftheMiddleEast,AsiaandthePacificregions.

The region is relativelywell‐connectedwith the rest ofAmerica andwith someimportantEuropeancountries,buthasveryfewrouteswithAsiaandthePacific,Africa and theMiddle East. Brazil is the only country with connections to thethree regions. The SAM States, except for Argentina, Chile, Peru and Panama,haveroutesonlytoAmericaandEurope.

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Map1.6.4–CountriesofdestinationconnectedviadirectrouteswiththeSAMRegion

Source:IATA.

Furthermore,veryfewaircarrieroperatorsfromthesesameregionsarepresent.

Theregionisnotyetfullyinterconnected.PassengersfromsomeofthesmallestStates, like Guyana, have no direct routes to more connected countries in theregionandfinditnecessarytoleavetheregiontoaccedetoindirectroutes.

Insofarasthequalityofitsconnectivityisconcerned,theSAMRegionstillshowsalarge potential for development. According to the World Economic Forum’s“Travel and tourism competitiveness report 2015,” Brazil (Position 28) andPanama (Position 34) lead the region in a sampling of 141 of the world’scountries. Generally speaking, the report reflects the finding that most of thecountries in the region need to work on improving the quality of their airtransport infrastructure andairportprocesses,onmaking theirbilateral serviceagreements (ASAs)more open, and on reducing airfare ticket taxes and airportserviceschargesinordertoimprovetheirglobalcompetitiveness.

1.2. Visionofthedevelopmentofaviationindustryconnectivityat2035

A number of different organizations recognized at the world level like IATA, ATAG,Boeing and Airbus estimate that air traffic in the SAM Region will increase byapproximately 4 to 6% a year on average. For purposes of this analysis, we haveconsideredanincreaseintheSAMRegionpassengerlevelfrom198millionin2015toover 430million in 2035. As a result, the vision of the region at 2035 shows a largepotential for growth, in which air traffic will more than double its current level.Specifically speaking, growingdemand (number of passengers and cargo) and supply(numberof routes, flights and frequenciesofferedbyair carrieroperators)will swellthe region’s connectivity.Even so, theboost in connectivitywillnotdependsolelyontheseelements;workwillalsobenecessaryonthreedevelopmentfronts,towit:

(i) Regulatoryliberalization(ii) Infrastructureexpansionandupdating

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(iii) Processefficiency

Figure 1.7.1 – Air connectivity development fronts (Prepared: In-house)

‐Airtransportsupplyanddemand:‐Regulation;‐Infrastructure;‐Processes;All industry stakeholders: States, airlines, air navigation system providers andairportshave theresponsibility toacton these fronts. Theymustcoordinateeffortsandcooperatetoenhancetheregion’seconomicandsocialprosperity.Thefollowingareasofdevelopmentandfacilitationfor improvedandmoreefficientair connectivity have been identified for the specific case of the SAM Region,considering the development fronts cited above. These are paired with specificobjectivesandmetricsinordertooutlineanactionplanforconnectivitydevelopmentat2035:

Table 1.7.2 – Development areas and objectives for improving the region’s air connectivity

Strategy Objectives

ALiberalizationofairtransportregulations

Takemeasuresforfulleropeningandmoreflexibilityinregardtothefollowing:1. Internationaltrafficrights(freedomsoftheair)2. Immigrationcontrolandvisapolicies

B Strengtheningofnationalairlines

3. Permit foreign investment in order to strengthennationalairlineoperationandsustainability

COptimizingofairtransportinfrastructure

4. Remove the main restrictions on capacity in thegroundandairzonesofeachState’smostimportantairports

D Simplificationofairportprocesses

5. Modernize airport processes to allow for moreseamlesspassengerandcargotransport

6. Facilitateandsimplify in‐transitpassengersecuritycontrols

EOptimizingofchargesandtaxlevels

7. Reducechargesand/orenacttaxexemptionsforairtransport

8. Improvethecontrolofoperatingchargesappliedbyairportstoaircarrieroperators

Air transport supply anddemand determine thepotentiallevelofconnectivity

An optimum level cannot bereachedwithout supporton thethree connectivity developmentfronts: regulation,infraestructureandprocesses

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Strategy Objectives

F Promotionofnewroutes

9. Expand the network of existing direct routes, inordertoachievegreaterintra‐regionalconnectivity

10. Enter new destinations and markets of countriesoutside the region showing a large potential forgrowth

GEstablishmentofaregionaltourismalliance

11. Jointlyattract travellersfromdistantcountrieswithlittlepresenceintheregionlikeAsiaandthePacific,theMiddleEastandOceania

H Consolidationofhubairports

12. Reinforce the operation of existing and potentialregional and domestic hubs to ensure that eachStatehasatleastoneefficienthubairport

I

Entryintoanddevelopmentofthelow‐costairlinemarket

13. Fosteranincreaseinthesupplyofflightsandroutesatmore competitive prices to ensure the inclusionofalargerpercentageofeachState’spopulation

14. Promotesecondaryairportsinordertoboosttrafficdevelopmentincitieswithlittleconnectivity

JPromotionofairlinealliancesandagreements

15. Establish a favourable regulatory environment forthe entry/operation of new airlines throughalliances

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ActionPlanSummaryObjective Activities Targets Date1) Attainment of a greater opening to international traffic (ASAs and freedoms of the air)

Review existing ASAs and propose changes 100% of the States 2020 Sign agreements/addenda within the SAM Region 100% of the States 2023 Sign agreements/addenda with other regions 100% of the States 2030

2) Attainment of more flexible immigration controls

Exempt all SAM Region States from visa requirements 100% of the States 2020 Exempt from visa processes or make them more flexible for the rest of the world’s countries

100% of the States 2025

3) Authorization of foreign investment in national airlines

Permit SAM Region air carrier operators to invest over 51% in their ownership

50% of the States 75% of the States

2022 2028

Allow a greater opening to foreign investors so that they can gradually attain a 51% shareholding


4) Elimination of restrictions on the capacity of the air and ground infrastructure of the main airports

Confirm that each of the region’s airports is provided with the operating plans recommended by ICAO (Airport Operational Efficiency)


Ensure that runway use at peak hours does not exceed 70% of the installed capacity


Outbound passenger service: 60 min Inbound passenger service: 45 min In‐transit passenger service: 30 min Cargo service: 4 hours until delivery

80% of the target 100% of the target

2025 2030

Total airport density ratio of 1.0 and international density ratio of 0.5 for each State


2025 2030

Implement ICAO’s performance‐based air navigation system PBIP


Annual airport growth and real capacity monitoring plan 100% of the States Starting in 2019

5) Updating of airport processes Self‐service check‐in modules


2020 2030

Centralized baggage drop‐off area 50% of the States 2020 DRAFT

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Objective Activities Targets Date 70% of the States 100% of the States

2025 2030

New security control technology using international standards (security metal detector arches, x‐ray machines, etc.)


2025 2030

Electronic immigration system processing (API – Advanced Passenger Information)


100% of the States

2025 2030 2035

Implement alternatives of “something to declare” and “nothing to declare” at customs


2020 2025

6) Simplification of traffic security control

Sign agreements among SAM Region States 50% of the States 100% of the States

2022 2025

Implement the one‐stop security (OSS) system 50% of the States 100% of the States

2025 2030

7) Reduction of charges and/or exemption from taxes on air transport

Review consumer charges and draft proposals for their reduction


2025 2030

Exempt international airfare tickets from payment of VAT 50% of the States 70% of the States

100% of the States

2025 2030 2035

Exempt overflights from payment of VAT 100% of the States 2022 8) Control of airport charges Review existing charges and set maximum levels 50% of the States

100% of the States 2022 2030

Implement special charges for airport use during periods of low flight frequency


2022 2025

9) Expansion of the intra‐regional flight network

Implement special charges for airport use during days of low flight frequency


Connect each State with at least 4 States in the Region (intra‐regional connectivity ratio of 29%)


10) Entry into new foreign destinations and markets

Open at least 3 direct routes to new destinations per State 75% of the States 2025 Possess at least one direct route in Asia and the Pacific, the Middle East, Africa and Oceania


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Objective Activities Targets Date11) Joint promotion of regional tourism for tourists from distant countries

Establish an organizing committee and set the date and venue for an event to promote regional tourism

At least 50% of the States participate 2020

Prepare and fund the event End of the activity 2022 Hold the event End of the activity 2023

12) Strengthening of regional and/or domestic hubs

Analyze the traffic and sphere of influence of each airport 50% of the States 100% of the States

2020 2025

Prepare investment plans to guarantee appropriate operation during peak hours


2022 2028

Consult with airlines interested in connection centres (hubs) 50% of the States 100% of the States

2022 2028

Implement the Master Plan 50% of the States 100% of the States

2025 2030

13) Augmentation of the supply of low‐cost airline flights and routes

Participate in a “Routes” or similar event in order to make presentations to low‐cost airlines


Arrange for one‐on‐one meetings with operators that show the most interest in operating in the region

At least one meeting per State 2021

Allow for the entry of at least one new low‐cost carrier with an operating license that will broaden the existing route network


14) Promotion of secondary airports Analyze the current status of the main secondary airports by State and cost benchmark


Review and improve existing legislation for the entry and operation of new air carrier operators


Allow for the entry of a new low‐cost carrier with a license to operate and routes into at least 1 secondary airport


2025 2035

15) Establishment of a regulatory environment favourable to the establishment of airline alliances

Review and secure a greater opening and/or the reduction of obstacles to joint operating structures and alliances


Review and improve existing regulations in order to permit the operation of offline airlines represented by GSAs

100% of the States 2022 DRAFT

2. Definitionofconnectivity

2.1. Whatisconnectivity?

The concept of connectivity comes from the verb “to connect” (in Latin,Connectere),which refers to the creation of a common link; to link up a whole. Connectivity,specifically referring to air transport, is the reason for the existence of airlines andrefers to their capacity to link up different countries and cities in the world so thatresources can be transported from one territory to another. Thanks to the aviationindustry, countries are interconnected through a global transportation network thatmakes it possible to move people, trade goods, provide services and send mail.AccordingtoICAO,“connectivityisapropertyofnetworksandcanbedefinedinsuchawayastoconstituteanindicatorofanetwork’sconcentration.Therefore,connectivityis the ability of a network tomove a passenger from one point to another with thelowest possible number of connections and without an increase in fare, focusing on,fromacommercialperspective,minimumconnectingtimeswithmaximumfacilitationultimatelyresultinginbenefitstoairtransportusers.2TherearetwoofCivilAviationcategories:(i)CommercialAviationthatinvolvestheairtransport of passengers, cargo or mail for remuneration or hire; and (ii) GeneralAviation,whichencompassesall operationsother thancommercial aviationandaerialwork(definedasbeingspecializedservicesoperations,suchasagriculture,construction,photography, mapping, observation and patrolling, search and rescue, and aerialadvertising,amongothers.)3The air connectivity network comprises: (i) routes between city pairs and (ii)weeklyflightfrequencies.Theflightscanbecabotageflightsinsideeachcountry(domestic)orinternationalflightsto/fromotherStates.Theconnectionsbetweencitypairs,fortheirpart, can be: (i) direct connections between two cities (point‐to‐point) or (ii) indirectconnectionsinwhichtwoormoreflightsareusedtoconnectthepointoforiginwiththefinaldestination(hubsorconnectionairports).Figure 2.1 – Types of air routes

DirectRoutes(Point‐to‐point):StateA(Origin)–StateB(Destination)IndirectRoutes(viahubsorconnectionairports):StateA(Origin)–StateC(Connection)–StateB(Destination)Preparation:In‐house

2WorldwideAirTransportConference(ATCONF)–SixthMeeting.(Montreal,2013)3OperationofAircraft,Annex6totheConventiononInternationalCivilAviation(PartII,1998).

Rutas Directas (Punto a punto)

Rutas Indirectas (vía hubs o aeropuertos de conexión ) DRAFT

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Such system permits the operation of a global market that distributes the resourcesmore efficiently, inwhich all nations have the opportunity to specialize in theirmostproductive economic activities, benefit from trade in resources with other nations atcompetitivepricesandshareknowledge,technologyandinnovationswiththerestoftheworld. Themore liberalized and integrated a global network is, the greater the long‐termbenefitsforallpeople.

2.2. Howcanitbemeasured?

Whilethereisnospecificwaytomeasureconnectivity,airconnectivitycanbegaugedintermsoftwonetworkcharacteristics:

(iii) Sizeandconcentration:The more routes and frequencies it has, the greater a State’s possibility forconnection. Evenso,it istheuseofthatcapacityforconnection(passengers,cargoandmail)thatwilldetermineanation’struedegreeofconnectivity.Acountry’sconnectivitywilldevelopinaccordancewiththeeconomiccharacteristicsandbenefitsproducedbythetraderesultingfromonecity’sconnectionwithanother.Inotherwords,itisnotenoughtomerelyconnectonepointwithanother;itisalsoimportant to measure the contribution produced by that connection in terms ofgreaterresourcemobilization.Forexample,connectingtwodevelopingcountries isnot the same thing as connecting one developing country with a more advancedeconomy. In the latter case, the degree of connectivity created in the networkproduces a greater impact by increasing its access to a larger andmore dynamiceconomyinwhichthetrafficthathasbeencreatedcouldprovetobemorebeneficial(tourism,businesstravel,movementofpersonnel,andexports,amongotherthings).Geographicconsiderationsalsoplayan importantrole. Theconnectionwithanewcontinent, for example, could be more beneficial than the addition of a furtherconnection within the same region. Connection with hub airports strengthensnetworkconnectivity,foritnotonlyprovidesaccesstoanewcity,butalsoopensthepossibilityofaccedingindirectlytoanentirenetworkofnewcities.(iv) Seamlessness:More direct routes with the fewest possible number of connections facilitate airtraffic.Embarkation,disembarkation,controlsandairportconnectiontimesallhaveanimpactonthequalityoftheconnectivity.

The various types of aviation industry consumers make their travel decisionsconsideringthreemainfactors:security,servicespeedandprice.Asaresult,greaterconnectivity is not gauged in quantitative terms alone, as to the number of flightsoffered and size of the destination airport. Qualitative elements must also beincorporated,indicativeoftheseamlessnessoftheservice,whethertheconnectionsaredirectorindirectandthegroundandairtransitspeed.TheSAMRegionappliestheConceptofOperations (CONOPS) inwhichStates, ICAO,airports, airnavigationservices providers, airlines and other stakeholders involved define the sphere ofactiontoensuresafeandefficientAirTrafficFlowManagement(ATFM).

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The more direct and rapid the connection, the lower the passenger’s cost inmonetarytermsandintermsoflosttime. Asinanyindustry, thelowerthecosttothe public, the greater the demand. As a result, more seamless connections willcontributetogreaterconnectivity.

Existing aviation literature advocates a variety of indices ormetrics4that account fordifferentconnectivitycharacteristicsandcanbeusedindividuallyand/orcombinedtoprovideabetterunderstandingofeachcountryor region’s connectivity. Someof thebest‐knownarepresentedinthefollowingtable:

Table 2.2.1 – Connectivity Indicators

Source: “Air Connectivity: Why it matters and how to support growth” (PwC) and each organization’s official website

From the above, it is clear that measuring connectivity is a complex task thatincorporates both quantitative and qualitative factors and that each individualmeasurementwillbeusedforreferencepurposesonlyandmaynotfullyincorporateallrelevant aspects. Furthermore, many of these indicators have not been updatedfrequently or in recent years; given the changing conditions in the aviation industry,their use cannot be considered representative. This document will later analyzedifferenttypesofmeasurementsavailableforevaluatingthedegreeandseamlessnessofSAMRegionconnectivity.

4“AirConnectivituy:Whyitmattersandhowtosupportgrowth”‐PwC,HayleyMophetandClaudiaBottini(2014)5AccordingtoACI(AirportsCouncilInternational),thatindexiswidelyusedinEuropeanairportconsultingservicesandprojects

Index Description

IATAConnectivityIndex

Measures the availability of a State’s flights to its variousdestinations weighted according to the importance(capacity and use) of the destination airports. It includesneitherprocessfluiditynorconnectiontimes.

WorldBankAirConnectivityIndex

Determines the integration of the global air market byconsidering the interactions among all countries, even inthe absence of direct flights (incorporates the benefits ofhubs). The index does not consider process fluidity orconnectiontimes.

World Economic ForumAvailability of Air TransportInfrastructure

Compares the number of available seats scheduled perweekforeachcountry.Thatmetricfailstoincorporatethenetwork’s actual traffic and does not consider processfluidityorconnectiontimes.

NetscanConnectivityIndex

Takesintoconsiderationtheseatingcapacityfordirectandindirect flights andhubs andalso incorporates connectiontimesandairportprocessfacilitation5.Itdoesnotconsidertheactualtrafficorthedestination’seconomicvalue.

YorkAviationBusinessConnectivityIndex

Focuses on measuring the value of air connectivity forbusiness purposes, based on the economic importance ofthedestination.

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2.3. Importanceofconnectivitydevelopmentanditssocio‐economicimpact

Structureoftheairtransportsector:Diagram 2.3.1 –Structure of the Air Transport Sector

Demand:‐Tourism‐Familyvisits/studytravel‐Business‐Trade(Cargo) Supply:‐Airlines‐Airportandairnavigationinfrastructure

Regulating State: ‐Civil Aeronautical Authorities (policy and regulation) ‐Service offices(customs,immigration,etc.)

Preparation:In‐house

AirTransportDemandThereare4typesofconsumers:(i)tourism,(ii)visitstofamily/friendsortravelstudies,(iii) business travel and (iv) cargo and mail transport. Each has its own individualcharacteristics and preferences, which airlines and governments take into account tostructuretheairtransportroutenetwork,frequenciesandservicesoffered.

Most tourists seek attractive destinations with suitable tourism infrastructure, areflexible as to travel times and consider price an important element in their choice oftravel destinations and seasons. There are also tourists who travel to attend majorevents (sportsorentertainment, forexample),whomaynotbeas flexibleas to traveldates andare strongly influencedbyair fares indecidingwhetherornot tomake thetrip.Travellersgoingtovisitfamilyorfriendsorforstudytrips,ontheotherhand,showsimilar behaviour in seeking themost economic fares and flexibility in choosing theirtraveldates,buthavelittleleewayinchoosingtheirdestinations.Business travellers, for their part, who fly to destinations where they have economicinterestsandattendpublicorprivateinternationalevents,giveprioritytospeed,flightavailability and connections. They place less importance on airfare ticket prices andseek,rather,flexibilityinbeingabletochangethedatesordestinationsofticketsalreadyacquired,ifnecessary.Thefinalcategoryiscargoandmailtransport.Inthiscase,thechoicetoshipthembyairgoes hand‐in‐handwith a cost‐benefit analysis of the service life of their product, itsweightand/orsize,thecostoftheairtransportandthesalesvaluetotheconsumer.Airisthemostexpensivemeansoftransport,butisalsotheonethatmovestheproducttothe destination market most swiftly; according to the ATAG (Air Transport ActionGroup),althoughlessthan1%ofthetotalexportvolumeistransportedbyair,thisvolumerepresents35%ofthetotalglobalexportvalue.

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AirTransportSupplyTheairtransportsupplyavailabletoconsumersisrepresentedbytheairlinesthatofferthetransportserviceandtheairportandairnavigationinfrastructurethatpermitstheflowandadministrationofflightsonthegroundandintheair.

Airlinescreate their routenetworksandpoint‐to‐point frequenciesandestablish theirhubsinsuchawayastoofferindirectflightsinaccordancewiththecharacteristicsandeconomic importanceof eachdestination and the expecteddemand fromeach typeofconsumer. As a result, they will make their decisions to operate flights in countrieswheretheStatepermitsthem,takingcaretoensurethattheirexpectedoccupancyratejustifiestheinvestment.Thegroundinfrastructureneededtohouseandsustainthe flight frequencyconsistsofthe airports and the terminalswhere theembarkationanddisembarkation takeplace,fuel is supplied, airport maintenance is performed and the aircraft are temporarilyparkedbetweenflights.TheyalsoofferconsumersaphysicalspaceinwhichtocomplywithallairlineandStateregulations(check‐in,security,immigrationandcustoms)andconstituteacommercialattractionofmutualbenefit toconsumersandairports.At thesame time, the Air Navigation Services Providers (ANSPs6) are equipped with thenecessaryairnavigationinfrastructureandtechnologytoorganizeairtrafficandensureflightsafety.Thesethreeservicesproviders(airlines,airportsandANSPs)mustalwaysworktogetherwhentheaimistoimproveaspecificcity’sconnectivity.Inotherwords,theofferingofnewdestinationsor increase in flight frequenciesbyanairlinecanonlybeachieved ifand when the airports and ANSP of the cities of origin and of destination possesssufficientphysicalandtechnologicalcapacitytomanagetheadditionalflightfloworifaninvestmentismadeinbroadeningthatcapacity.Theimportanceoftherestofthestakeholdersinvolvedintheaviationindustry,whichsupplyand/orproviderelatedservicestofacilitateflightqualityandoperation,cannotbe overlooked: airplane manufacturers, travel agencies, tourist operators, safetytechnicians,andcateringservices,amongothers.RegulatingStateThe aviation industry cannot exist without the regulation and authorization of eachterritory’sState. It is thegovernmentsthatareresponsible forgranting licensesto flyand for certifying and regulating the operation of the aviation industry in theirterritories.State interaction takes place for the most part within the framework of bilateral ormultilateral ASAs (Air Services Agreements), in which each country defines thecommercial air rights governing the use of its territory by other States to transportpassengers, cargoand/ormail. Theseagreementsusuallyestablish thecharacteristicsthatwilldefinethesizeandconcentrationofthecountry’sconnectivitynetwork,suchas:licensedroutesandairlines,numberoffrequenciesandauthorizedFreedomsoftheAir7,

6AirNavigationServicesProviders7Theso‐calledFreedomsoftheAirwereestablishedin1994,throughtheChicagoConvention.Thereare9freedoms,brokendownintotechnical,commercialandother freedoms. Theyspecifydifferentdegreesof freedomandauthorizationsof the

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among other important factors. As a result, connectivity will be greater where theregulatoryframeworkismoreliberal‐‐inotherwords,inStateswheretheASAsarelessrestrictiveandmoreflexibleinfacilitatingtheindustry’soperationanddevelopment.TheRegulatingStatealsohasan influenceonthequalityof theconnectivityofferedtothe inhabitants bynot only establishing commercial air rightswithin its territory, butalso by taking charge of various strategic tasks that make the sector’s appropriateoperation possible through each country’s Civil Aviation Authorities (security, airportplan, air navigation systems, and coordination with customs, immigration and otherofficialagencies).

Socio‐economicbenefitsofaviation:Commercialaviationhasbeenoperatingforover100years.Foralongperiodoftime,thesectordefined itself as “elite” transportation,heavily regulatedbygovernments throughinflexibleratesnotacceptabletothegreaterpartofthepopulation.Theadventofglobalizationandtheconsequentmarketopeningandliberalizationoverthepast30yearstriggeredagreatdealofeconomicandsocialdevelopmentworldwide,withtheresultthatastrongermiddleclassemergedandbegantogainaccesstotheseservices,previouslyconsideredaluxury.Togetherwiththis,newaeronauticaltechnologyemergedand larger and lighter aircraftwith lower fuel consumptionwere introduced,making itpossibletobringdownoperatingcosts;asaresult,airfareswerereducedandconditionsmademoreflexible.AccordingtoATAG,airtransportationcostshavedroppedover60%inrealtermssince1970.Today,54%ofalltouristsworldwidetravelbyair.In2015,atotalof3.6billion(40%internationaland60%domestic)passengersand51.2 million tonnes of cargo were transported annually. There is a networkapproaching53,000routes operated bymore than1,400airlines through almost4,000airports8.

Itisdifficulttogaugethetruefullimpactoftheaviationindustryontheglobaleconomy,foritsbenefitsgobeyondthedirectconsumerstoimpactthestrengthsofeacheconomy.Inthecurrentcontextofglobalizationandcommercialopening,acountrywithoutpolicymeasures for developing appropriate connectivity finds its opportunities for economicgrowth and development limited. Below is a description of the main socio‐economicbenefitsofgreateraviationconnectivityworldwide:

, IncreaseinGDPandcreationofemploymentThefirstimpactidentifiedwillalwaysbetheincreaseinacountry’sdomesticproductionandtheconsequentcreationofemployment.Evenso,itisimportanttodefinethesphereof influenceofaviationwithineacheconomy.Economicliterature identifies4benefitsoftheaviationindustrywithinacountry’seconomy:

States signatories to the agreement, with regard to overflights, landings, and the embarkation and disembarkation ofpassengers,cargoandmailinorthroughtheterritoriesofthesignatoriesorofthirdparties8AviationBenefitsBeyondBorders”–ATAG,July2016.AccordingtoATAG,thereare41,788aviationfields,includingcommercial,generalandmilitaryaviation.

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Si la industria aérea fuera un país,

ocuparía el puesto número 21 entre las

economías más grandes del mundo

Figure 2.3.1: Global impact of the aviation industry

-Direct -Indirect -Induced -Catalysts (tourism) Employment (millions of jobs): 62.8 million jobs GDP (US$ trillions): US$ 2.7 trillion

If the aviation industry were a country, it would rank 21st among the world’s largest economies. Source: ATAG

Direct impact: The production and creation of employment by the companiesdirectly involved in the aviation sector‐‐in other words, airlines and all airportservices (including airplane manufacturers, maintenance services, air trafficmanagement,restaurantsandduty‐freestores,amongothers.)Indirect impact: The increase in production and creation of employment bycompanies indirectly related to the aviation industry (providers and connectedservices). Some examples are: fuel suppliers, catering companies, travel agents,financial services companies, electricity companies, construction companies,systemsengineeringandmanyotherbusinessesthatbenefitfromtheservicestheyprovidetotheaviationindustry.Inducedimpact:theadditionalproductandemploymentproducedinacountry’seconomy as a result of the increase in purchasing power of people directly orindirectly employed by the aviation industry. Some examples are shoppingcentres,restaurants,andbanks,amongmanyotherdomesticbusinessesbenefittedbythegreaterpurchasingpowerofacountry’sinhabitants.Catalyzingimpact:Allof theother industriesandactivities strengthenedby theoperationofcommercialandgeneralaviation.Tourismisoneofthedrivingforcesof the global economy, particularly in the case of developing countries. Touristsdirect their spending toward an entire network of businesses, likeaccommodations, restaurants, car rental, and shopping centres, among others. Itshould be stressed that the economic impact of the tourist sector extends toofferingmoreandbetterqualityproductsandservicestonotonlytourists,butalsoto local inhabitants. The aviation industry also contributes to domestic and

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international trade by giving companies access to a largermarket. It should bementionedthatsomecommercialtrade, likethesaleofperishablefoodproducts,would not be possible without a rapid and safe means of transport, like airtransport.

It isestimated that theglobalaviation industryproducedatotalofUS$2.7trillion(indirect,indirect,inducedandcatalyzingactivities),representing3.5%ofglobalGDP.Italsoaccounted fora totalof62.8million jobsworldwide9. ATAG estimated thesefiguresfor2015anditshouldbestressedthatitisdifficulttocomprehensivelygaugeallofthecatalyzingeffectsthatcouldbeproducedbytheaviationindustrywithinaneconomy.ATAGincludedonlythecatalysteffectoftourismanditsfiguresfailtoincludethebenefitsofaviationintermsoftheemploymentandproductofcompaniesorindustriesthathavedevelopedwithinacompanythanksonlytothepresenceoftheaviationindustryorofthevaluecreatedbydomestictransportortrade,aswellastheintrinsicvaluecontributedbytheindustrytoacountryintermsofgreaterswiftnessandconnectivity.

InvestmentpromotionandinfrastructuredevelopmentThe aviation industry is responsible for large investment flows within each country inwhichitoperates,notonlytoprocurethephysicalinfrastructureitneedstooperate,butalso for the continuousdevelopmentand innovationofnewairnavigation technologies.According to ATAG, in 2014, airports invested a total of US$ 37 billion in newconstructionprojects. Atthesametime,itisestimatedthateveryUS$100millioninvestedintechnologicalresearchanddevelopmentproducesanadditionalUS$70million inGDPyear‐by‐year. The aviation industry also promotes three branches ofeconomic investment (foreign, public domestic and private domestic), not only throughtheinvestmentsofstakeholdersdirectlyinvolvedinthesector(airlines,airportsandtheState),butalsobyactivatingandboostingacountry’seconomicactivities.Oneofthebenefitsofincreasedglobalizationisthatitfacilitatesforeigninvestmentintherestof theworld’s countries. Today,many corporationsoperatebeyond thebordersoftheircountriesoforiginandenabletheinhabitantsofneighbouringcountriesandevenofothercontinentstoaccedetotheirgoodsandserviceslocally.Thisbenefitsthecountryoforigin that entersanewmarketand the countryofdestinationwhere it createsgreateremploymentandenhanceseconomicactivity.Furthermore,thearrivalofnewindustriesorproducts cangive consumers access to alternativegoodsand services that cannotbeproducedlocally,therebyenhancingtheirwell‐being.At the same time, (public and private) domestic investment is encouraged in otherindustries. The construction of access routes to link up the airport with the city, thepromotionofnewbusinessoran increase in theproductioncapacityofalreadyexistingindustries to take advantage of the opportunity to serve arriving passengers, thepossibilityofprovidingservicesandsolutionstocompaniesinvolvedinairtrade,areonlysomeofthemanyopportunitiesthatarecreatedforthedifferentbranchesofpublicandprivateactivity. IncreaseinproductivityThe aviation industry, by facilitating domestic and international trade, in addition toallowing for the unhamperedmovement of personnel and resources between different

9“AviationBenefitsBeyondBorders”–ATAG,July2016

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territories,helpstoincreaseproductivityindifferentsectors.Thissituationbenefitsbothconsumersandproducers:

o Itallowscompaniestobecomespecializedinactivitiesinwhichtheydemonstratecomparativeadvantagesandtomakeuseofeconomiesofscalebyenteringlargermarkets,insuchawaythattheycanmaximizetheirprofitsand,atthesametime,offeragoodorserviceatbetterprices.

o Itfacilitatestheoperationoftransnationalenterprisesthatlocatetheirfacilitiesor

move their personnel and/or resources to strategic territories where they canoperate at a lower cost or enjoy a comparative geographic advantage. Thatsituationbooststheproductivityoftheiroperationsandcreatesemploymentintheeconomiesinwhichtheyoperate.

o The entry of foreign competitors broadens the array of products and services

offered locally and creates a competitive environment with better marketconditionsforthebenefitofconsumers.

o Theentryof foreignproducts and companies also encourages local companies to

adoptbetter internationalpractices (inorder to reduce theirunit costs andkeepthemselvescompetitive)ortoseekinnovationsthatwouldenablethemtoreducetheir costs or increase their productivity or that would give their products orservicesgreatervalue.

PromotestechnologicalinnovationandsustainabledevelopmentAir transport is a highly technological activity that requires continuing investment inresearchanddevelopment.Thatinvestmentnotonlyfuelsthemanufactureofaircraftandair navigation systems, but also promotes university research and developmentdepartmentsandtheeducationandtrainingofhighlyqualifiedspecialists.Itshouldbestatedherethattheaviationindustryhascommittedactivelytoinvestinnewtechnologytofightclimatechange.Althoughtheindustryisresponsibleforonly2%oftotalglobalcarbonemissions(739milliontonnesofCO2), ithasset itself thetargetofachieving sustainable development in coming years through a three‐pronged effort: (1)attainingsavings in fueluseofat least1.5%ayearupuntil2020, (2)stabilizingcarbonemissionsat their levelsof2020andcontinuing fromthatpointonwithneutralcarbongrowthand(3)reducingcarbonemissionsto50%ofthenetemissionlevelsof2005at2050.

Facilitateslabourmobilization(boostsremittances)Asinthecaseoftradeingoodsandservices,labourmobilizationenablesindividualstoseekbetterworkingopportunitiesineconomicandqualitativeterms,andcompaniestoaccedetoalargerandmoreskilledlabourpool.The ease and speed with which people can travel between their cities of origin andemployment also facilitates thedecision towork far from the family. Many emergingcountriesdependheavilyontheremittanceoffundsbylabourmigrantswhosendpartoftheirincomesearnedabroadforthemaintenanceoftheirfamiliesintheircountriesoforigin. Taxcollection

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TheaviationindustryisamajorcontributortothetaxescollectedineachoftheStatesinwhich it operates. Those taxes come from the incomes ofworkers employed directlyandindirectlybytheindustry,socialsecuritypaymentsandcorporateincometaxesand,in some countries, theVAT chargedon airfare tickets andother services. An inducedand catalyzing benefit can also be said to exist in the case of taxes, as a result of theincreaseinoutputandemploymentinotherindustriesbenefittedbyairtransport. ConnectsremotetownsandvillagesThere are territories and communitieswhere, because of their rugged topography orlack of ground infrastructure, air travel is the best or only available transportationalternative. Some examples are Easter Island (belonging to Chile) or distantcommunities and towns in the Peruvian and Bolivian Andes, or villages in southernArgentinaandChile.Acitywithoutcommunicationsandconnectivitywouldnotbenefitfrom progress and would have no opportunity to share in the socio‐economicdevelopment of the country or region. It could also be prevented from obtainingadequate access to basic education and health services. In those cases, the aviationindustryplaysacrucialconnectivityrole. EnableshumanitarianaidtobereceivedduringemergenciesIn thecaseofnaturaldisasters likeearthquakes, tidalwavesandhurricanesorofwarrequiringurgentaid,airtransporthasproventobethebestalternativefortransportingmedical and rescue workers rapidly and efficiently, evacuating the wounded andtransferring donated medicines, clothing, food items and all other primary needs. Insome cases, access by other routes is impossible because of lingering after‐effects,makingjointeffortsnecessarybymilitaryandcommercialaviationandtheaviationfleetspecializedinhumanitarianaid.2.4. Whatfactorsdetermineacountry’sdegreeofconnectivity?

Therearetwowaystoincreaseacountry’sconnectivity:(i)byopeningupnewdirectorindirect routes or (ii) by increasing the frequency of already existing routes. Airlinesdefine,structureandproposetheirconnectivitynetworkstoStatesbyfirstconsideringacountry’s geographic, political and economic characteristics and situation and itsrelationshiptotherestoftheworld’seconomies.Theydecidewhetherornottoenteranewmarketbymakingacost‐benefitanalysisofthepotentialdemandtheycouldmeet,the business climate in which they would operate and the obstacles they couldencounter.Direct routes between the consumer’s origin and destination produce better qualityconnectivity; the more direct routes a State has in operation, the better its globalposition.Inthosecases,consumersbenefitfromlowerairfaresandreducetheirtraveltimes, prompting a greater demand for the service. Likewise, if a city is used as anaviation hub toward other destinations, its connectivity level with the world will begreater,aswill thepositive impacton itseconomy. A largepassengerandcargo flowthrough its territory will produce important direct, indirect, induced and catalyzingeffectsindifferentsectorsofitseconomy.AnexampleisthecaseofPanama,oneoftheregion’smainandmostdevelopedhubs.AccordingtoinformationputoutbytheWorldBank,thecountry’spassengerflowhasgrownatmorethan20%ayearoverthepast10years,andthishasgonehand‐in‐handwithaverageannualGDPgrowthof8%overthesameperiod,constitutingthehighestintheregion.

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Theprincipalfactorsthatcandeterminethesizeandqualityofacountry’sconnectivitynetworkare: Air‐groundsafetyAirconnectivitycannotexistwithoutsafety. Airlinesandgovernmentsprioritizeflightsafety inorder to strengthena long‐term industry. Whenanaccidentoccurs, this canaffect thedemand forconnectivitywith theairlineorairport involved. The industry’ssafetyisthefirstlinkintheproductionchainonwhichthesustainabilityoftheaviationsystemrests.

TouristattractionandpotentialThegreaterthetouristpotentialanddevelopment,thegreatertheinterestofStatesandairlines increatingdirectroutestosuchdestinations. Thatpotentialmustgohand‐in‐handwithanappropriateinfrastructureofroads,hotels,restaurantsandotherservicescapable of properly supporting the flow of inbound passengers. As seen earlier, thetouristindustryisanextremelybeneficialgeneratorofemploymentandproductionforacountry,makinginvestmentinitsdevelopmentamatterofpublicandprivateinterest. BusinesspotentialInthiscase,itisimportanttodifferentiatebetweentheinterestofforeignersinenteringthe localmarket and the interest of local businessmen in acceding to an internationalmarket. Greater connectivity will depend largely upon potential and existing traderelationsbetweenthelocaleconomyandeachdestination.Ifweanalyzeconnectivitybyregions,itisusualtofindthatmostcountriesenjoyahighdegree of connectivity with their neighbours, as the connection costs and speed aremore reduced in that case. Stronger economies or those showing evidence of greatopportunities for development could become attractive to more developed countriesseeking to diversify their investments or interested in some specific business orindustry.Themorediverseandprosperousthelocaleconomyisseentobe,thegreaterthe interest increatingabroad‐basedconnectivitynetworkwithin its regionandwithothercontinents. AirportinfrastructureRoutes or frequencies to a given State cannot be increased without the necessaryphysicalcapacityofairportterminalstosustaintheincreasedflightflow.Asaresult,thenumberandsizeofairportsexistingineachcountryorcitywillalwayslimittheincreaseinconnectivity. Accesstoandthe locationoftheairportsalsoplaysan importantrolebecause it contributes to the quality of the service offered to passengers and has aninfluenceontheirdecisionofwhetherornottotraveltothatdestination.Inaddition,thetechnologyusedandthecomplexityoftheprocesses(check‐in,customs,immigration and security) can also affect passengers’ experience and their expecteddemand.Thisisparticularlyimportantinthecasesofcitiesthatarechosentobehubs,where the passenger’s experience in regard to the service received and the speed ofconnectionspositionstheairportasabetterconnectioncentreandfacilitatorofglobalairtrafficfluidityandconnectivity.The ideal is to have a clear and simple flow of procedures using the same sharedinformation system, a single language accessible to all airlines, customs offices and

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immigrationservices,therebyenhancingtheproductivityoftheinformationrequiredofall passengers and reducing consumer times and costs. This is particularly importantduring “peak hours” when passengers from several flights congregate simultaneouslyandthecapacityforresponseofairportandairnavigationsystemsproceduresarekeyinensuringthatflightsdepartasscheduledandthattherearenooperationaldelaysorshortcomings.Betterqualityserviceproducesgreaterdemandinthelongterm.

GeographiclocationanddemographicsituationEachcountry’suniquegeographiccharacteristicsanditslocationintermsoftherestofthe important cities in the regionoronother continents candetermine thenecessarydegree of connectivity. Access to oceans, presence of mountains, population size anddensityofeachcityintheterritoryandmanyotherelementscaninfluencethedecisionand need to create amore or less concentrated domestic and foreign air connectivitynetwork.Furthermore,thestrategicpositioningofacityorcountrywithrelationtotherestoftheworld’seconomiescanpromotetheuseofitsterritoryasalink‐uppointwithotherdestinations(hub). TechnologicalinnovationContinuoustechnologicaldevelopmentofairnavigationsystemsandinnovationinaircraftdesign enhance safety levels,making it possible to reduceoperating costs as a result ofgreaterefficiencyandbroadens theofferingof long‐haul (distances)and larger‐capacity(passengers) aircraft with no need for en‐route refuelling. These elements help offerconsumers prices that are more competitive and can make new direct route optionsprofitableandenhanceglobalconnectivityorthatofanyparticularterritory.One of ICAO’s priorities today is to ensure the development and implementation ofdifferentairnavigationmethods,somebeing:PBN(PerformanceBasedNavigation),CDO(ContinuousDescentOperations),CCO(ContinuousClimbOperations)andAMAN/DMAN(runwaysequencingcapabilities).Thesetechnologicalinnovationspermitbetterairspacemanagement by optimizing flight operation safety, seamlessness, order and efficiency,permittingcost reductions, improvingpilot‐air controller communications,andreducingtheenvironmentalimpact,amongotherbenefits.Information technology innovation is another important element for improving airtransportqualityandfluidity.Overthepastdecade,IATA(theInternationalAirTransportAssociation) worked with the airlines to develop projects designed to simplify andfacilitate passenger and cargo service processes. Easily accessible self‐services wereimplemented that have benefitted consumers and reduced airline costs, making themmorecompetitive.

The first project, “Simplifying the Business,” was launched with the issuing of theelectronicticketthatmadeitpossibletouseasingletwo‐dimensionalboardingpass(BP2D) from the point of origin and for all passenger connections en‐route to his/herdestination,withtheaddedfacilityofbeingabletouseelectronicdevices(mobilephones)for theboarding controls. Another example of the improvements is the useof Internetcheck‐insorcheck‐inatairportelectroniccounters.Inthecaseofaircargo,the“e‐freight”projectmakesitpossibletotransportcargowithoutanyneedforprinteddocumentswheresecureelectroniccommunicationscanbeused,asin thecaseof the issuingand transmissionof theelectronicairwaybill. Thatprocess is

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regulated by State customs standards, following the guidelines of the World CustomsOrganization.

Inlinewiththepassengerself‐services,thesecondproject,knownas“FastTravel,”offerspassengers more electronic options like the printing of baggage tags for delivery ofbaggageatcentralizedairportdrop‐offpointsandthe“PassengerFacilitation”projectthatoffers solutions for efficient passenger passage through Security, Immigration andCustomscontrols(servicesregulatedbyeachcountry’sgovernment).

AirlinebusinessmodelAs inthecaseofany industry, thecharacteristicsandservicesofferedbyairlineshavevariedovertimeandhavealsoimpactedthecountries’degreeofconnectivity.Acaseinpointistherecententryintothemarketoflow‐costcarriersthathaveboostedgreater connectivity on short routes and broadened the access of lower‐incomepopulationgroups. Thisservice initially targetedtouristsand familyvisitors,butovertimeevolvedtowardstheconquestofthebusinesstravellermarketbecauseofthewideofferingoffrequenciesandroutes.Loyaltyand frequent flyerprogrammesareother systems thathavebrought aboutanincrease in connectivity and in number of flights. The accumulation of kilometres ormiles travelled and the possibility of acceding to upgrade services have helped toconsolidateanetworkofloyaltycustomerswhoseektobenefitfromfreeflightsand/orimprovementsinthequalityoftheirflightexperiences.Themoredistancetravelledandnumber of flights taken by passengers, the greater their access to additional benefits.Thefinaleffectisalargerpassengerflowwillingtotravelseveraltimesayearinordertoenjoythosebenefits,eithertowardnewroutesorfrequentdestinations.Toconclude,theimportancethatairlinepartnershipsandallianceshavetakenonmustbe mentioned. Interline or commercial cooperation agreements allow for the jointoperation of routes not economically viable for a single airline. They also enhancepassengertrustinchoosingtotravelrouteswithconnections,forwhichasingleairlinereservationwillbesufficientwithonlyonecheck‐inandbaggagedeliveryatthepointoforigin, therebyreducingthecomplexityof in‐transitairportprocessesandlostwaitingtimes.

. RegulatoryliberalizationBilateral and multilateral agreements among countries (ASAs) and foreign relationsstandardsandregulationsareoneofthemostimportantelementsinfluencingaState’slevelofconnectivity.EachStatedeterminesitsownpolicyinaccordancewithitscharacteristicsandeconomicneeds.Bywayofexample,itislikelythatgeographicallyisolatedeconomieswithoutastrongtouristindustryforattractingpassengersoralittledevelopedaviationindustry,willagreetoliberalizetheirairregulationsinordertoaccedetotheglobalizedmarket.Moredevelopedeconomiesandthosewithalargenumberofroutes,ontheotherhand,couldprefergreaterregulationoftheirdomesticmarketsinordernottoadverselyaffectnationalindustry,producinganegativeimpactonthedevelopmentofconnectivity.

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AlthoughmanycountrieshavechosentoliberalizetheirASAsinrecentyearsbymeansof“openskies”agreements,inpracticetheiroperationalrestrictionsarestillinplaceandhavebecomethemainstumblingblocktotheirachievementofgreaterconnectivity.LimitationsonconnectivitydevelopmentSomeofthemostsignificantregulatoryissuesrestrictingconnectivitydevelopmentare:o The complexity of theprocesses andprocedures for securing in‐transit and visitor

visas(tourist,business,study,etc.)areoneoftheprimaryobstaclesholdingbackthefacilitationofconnectivityviaindirectroutesandtraffichubs.Residentvisas,ontheotherhand,affectthedevelopmentofallindustriesthatbenefitdirectlyorindirectlyfromtheaviationindustry’sexistence.

o The limitation on the number of route frequencies and possibilities of given air

carrieroperatorsnotonlyhinderstheirpossibilitiesforincreasingtheirconnectivity,butalsoinhibitsfreecompetition.Thiskeepsfinalconsumersfrombenefitingfromthe lower fares or better services that would emerge in a more competitiveenvironment.

o EachState’spowertorejectthecreationofairlineswithasignificantpercentageof

foreign ownership also limits a country’s potential for connectivity, above all byobstructing the global airline market for mergers and consolidations in order toaccedetoeconomiesofscale,reducecostsandtakeadvantageofefficientoperationalplatforms.

o Inmost cases, countries havemultiple bilateral ASAswith different characteristics

andrestrictionsthatevengosofarastospecifytheauthorizedairlinesandairports,aswellasthenumberoffrequenciesandrouteslicensedforeachspecificcase.Ifanew airline requests permission to fly within the context of an ASA or an airlinealreadyconsidered in anASAsignedby twocountrieswishes to flya routewithanewairport, forexample,theycannotdosounlessanewnegotiationiscarriedoutbetweentheparties.

o Inthecaseofdevelopingcountrieswithlittledevelopedaviationindustriesoftheir

own, limitation on the origin of airline property ownership obstructs anddisincentivates the injectionof foreign capital and inhibits development of a giventerritory’sfullpotentialforconnectivity.

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3. Socio‐economic conditions and situation of the aviation industry in the SAMRegion

Figure3.1–MapoftheSAMRegionbyincomelevel,as

classifiedbytheWorldBank

LEGEND: ‐High income nations ‐Lower middle‐income nations ‐Higher middle‐income

nations‐Unclassifiednations Source:WB(WorldBank)

3.1. GeneralDescriptionTheSAMRegion (SouthAmerica), asdefinedby ICAO, ismadeupof14 countries (13States and 1 Territory): Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana,French Guiana (French Territory), Panama, Paraguay, Peru, Suriname, Uruguay andVenezuela.Thesecountriestogetheraccountfor40.5%ofthetotalareaoftheAmericasand 13.5% of the world. Their total population is 420 million (5.7% of the world’spopulation).Overone‐halfof thepeople live inBrazil (with204million inhabitantsor49%),followedbyColombia(48millionor12%)andArgentina(43millionor10%).Interms of their overall GDP (adjusted by PPP – Purchasing Power Parity10), 93% are

10Metodologyusedtocompareeachcountry’sGDPusingacommonbase(US$),adjustedfornationaldifferencesincostofliving.

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concentratedinonly6ofthe14countries(Brazil,Argentina,Colombia,Venezuela,ChileandPeru),withBrazilaloneaccountingfor48%.

Charts 3.1.1 – Population and GDP distribution, by country

Population distribution in 2015, by country (millions of inhabitants): Brazil….Others 28

GDP distribution (PPP) in 2015 SAM Region: Brazil 48%...Others 7% Source: IMF (International Monetary Fund). UNdata (United Nations) for the case of French Guiana

Thisisoneoftheworld’smostdiverseregionsinsocial,culturalanddemographicterms.Originally occupied by an indigenous population, it was colonized by Spaniards andPortuguese, supplemented by a forced inflow of slaves from Africa and massiveEuropeanandAsianimmigration.Withahighlyvariedgeography,itpossessesalltypesof climates and altitudes, fromhandsome beaches and deserts to the imposing AndesmountainsandtropicalAmazonjungle. Becauseofthesecharacteristicsandashostto81recognizedUNESCOWorldHeritagesites,theSAMRegioncontainsanattractiveandvariedproposalformanykindsoftourists.The region is made up for the most part of raw materials exporters, which areaccordingly highly influenced by alterations in international commodity prices.According to the latest World Bank classification by income, the region consistsprimarily of uppermiddle‐income economies,with the exception of Chile, Argentina11and Uruguay, which are ranked as being high income, and Bolivia, as lower middle‐income.ItshouldbeaddedherethatFrenchGuiana,asapartofFrenchterritory,isnotclassifiedindividually.Economic policy‐wise, a large variety of systems are applied. We have the case ofcountrieswithmostlycapitalisticandfreemarketsystems,likeChile,PeruandPanama,mixed economies with different degrees of openness to trade and regulations forprotectionof their local industry, likeArgentina,UruguayandBrazil andheavilyStateregulated economies with a more nationalistic orientation, like Venezuela. TheircombinedGDPisUS$3.6trillion,or4.9%ofglobalGDP,whiletheirpercapitaGDPisontheorderofUS$8.5thousand(US$1.5thousandlessthantheworldaverageofUS$10thousand).

11Argentinaisbeingevaluatedforapossiblereclassification.

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Economicgrowth,promptedbyafavourableworldenvironmentanddomesticreformscarriedoutbyeachcountry’sgovernment, triggeredanimportanteconomicandsocialchangeintheSAMRegionduringthepastdecade.Althoughtheworldmacroeconomicenvironmentisexperiencinganeconomicslowdown,withasizeabledropincommodityprices and reduction of the purchasing power of the developed economies, a largenumber of the SAM Region States achieved growth levels above the world average(3.5%).PanamaandBolivialedthatgrowthwithaverageannualGDPfor2010‐2015ofover 5%. Paraguay, Peru, Colombia, Guyana, Ecuador, Chile and Uruguay have alsooutstripped averageworld growth.ButArgentina, Surinameand, above all, Brazil andVenezuelahavetrailedfarbehindtheglobalaverage,duemainlytotheindividualeffectsofdroppingoilprices,politicalturbulenceandeconomicslowdownsineachcountry.Charts 3.1.2 – GDP and per capita GDP growth, by country

GDP: Average annual growth 2010-2015 and projections for 2016-2021 – SAM Region vs. the world .Proj 2016-2021 .Growth 2010-2014 Venezuela…Argentina World…Fr. Guiana

Per capita GDP adjusted by PPP in 2015 (in dollars) ….Fr. Guiana

* The data for French Guiana corresponds to the most recent information available, 2010-2013 Source: IMF, INSEE (Institut national de la statistique et des études économiques) for figures for French Guiana, which are not adjusted by PPP and are shown for reference purposes only

Purchasing power in the SAM Region ranges from US$ 6.5 thousand to US$ 23.5thousandayear,dependingoneachterritory.ThecountrieswiththehighestpercapitaGDP(adjustedbyPPP)are:Chile(US$23.5 thousand),Argentina(US$22.6thousand),Panama(US$21.8thousand)andUruguay(US$21.5thousand).ThosewiththelowestpercapitaGDPareBolivia(US$6.5thousand),Guyana(US$7.5thousand)andParaguay(US$8.7thousand).

Charts 3.1.3 – Importance of trade, travel and tourism, by country Trade in 2014, by country Travel and tourism industry in 2015 (as a percentage of GDP) (as a percentage of GDP) Source: WB for trade and WEF (World Economic Forum) for the travel and tourism industry. No information is available for French Guiana. Ecuador was not included in WEF’s calculations because of a lack of data.

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TradebetweentheSAMRegionandtherestoftheworldandamongits13countriesand1 territory constitutes one of the most important sources of each territory’sdevelopmentandwealth.Internationaltradeaccountsforover30%ofGDPin12ofthe14 States. Asmentioned earlier, the region is a heavy rawmaterials exporter and theaviationindustryplaysahighlyimportantroleinthattrade.AccordingtotheWorldBank,globalspendingontourismin2015amountedtoUS$1.3trillion,ofwhichtheSAMRegionwasresponsiblefor4.7%(US$63.1billion)12. Inthisspending,Brazilrepresented52%,followedbyArgentinawith12%andVenezuelaandColombiawith9%. Furthermore,WorldEconomicForum(WEF) figures reveal that7countriesintheregionhadtravelandtourismindustriesthataccountedforover3%oftheirGDPs, ledbyPanamawith5.9%.At the same time, Suriname showed the lowestrelativevalueof0.9%.3.2. IndustryandAirConnectivityFigure3.2.1–Mapoftheregion’sconnectivitywiththeworld

12ThefiguresestimatedbytheWorldBankdonotincludetheterritoryofFrenchGuiana

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The shaded area shows all of the territories with which the region as a whole is connected. Source: IATA

IATA information reveals that in 2014, the SAM Region transported a total of 198.4million passengers, amounting to approximately 6 to 7%of theworld traffic. Of thetotal passengers transported in the region, Brazil, Colombia, Argentina and Peruaccounted for 75%. At the same time, according to theWorld Bank, a total of 4,925million tonne‐kilometres of cargo were transported, with Brazil, Chile and Colombiaresponsiblefor85%.Today,theregionhasanetworkconsistingofabout300airports(106international)andmorethan80airlinesauthorizedtooperate.ItshouldbeaddedherethatPanama,Bogota,SaoPauloandLimaareexamplesofcitiesthathaveairporthubsintheSAMRegion.The region’smost importantairlinegroupshavebeenconsolidated in recentyearsbymeansofmergersandacquisitions,with theresult that todaythereare3mainactors,namely LATAM, Copa Airlines and Avianca. At the same time, the main internationalactorsthatregularlyservevariouscountriesintheregionare:AmericanAirlines,UnitedAirlines,Delta,Iberia,KLM‐AirFranceandLufthansa.

Figure3.2.2–MapoftheSAMRegion’sconnectivity

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Charts 3.2.1 – Passenger and cargo distribution, by country

Number of passengers, by country (in millions) Domestic and international flights: Brazil…Peru…Panama…Others 4%

Freight tonne-kilometres (millions) Domestic and international flights: Peru…Others 254

Source: IATA, WB

If we compare the total number of passengers transported with the size of eachcountry’sGDP,wewillsee thatapositiveratioexists‐‐inotherwords,countries in the

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regionwithalargerGDPalsotransportmorepassengers.Thisrevealstheexistenceofapositiveratiobetweengreateraviationindustrydevelopmentandacountry’seconomicprosperity. The two factorsoffereachothermutual feedback,with theresult that themoredevelopedtheaviationindustry,thegreaterthebenefitforthecountry’sGDPandthegreater thepeople’spurchasingpower, thegreater thedemand for travel, therebyboostingthedevelopmentoffurtherconnectivity. Charts 3.2.2 – Passenger and cargo distribution, by country

Ratio of GDP to number of international and domestic passengers, by country Millions of passengers US$ billions of GDP …French Guiana

Ratio of GDP to number of international and domestic passengers, by country Millions of passengers US$ billions of GDP …French Guiana

Source: WB. IATA provided the data on passengers for French Guiana

TheWorldEconomicForum,aprestigiouspublic‐privateorganizationforinternationalcooperationhasforthepast9yearsincludedkeypersonsandleadingthinkersfromtheindustry in its“AviationandTravelIndustryPartnershipProgramme,” throughwhichanimportantanalysisismadeofthecompetitivenessofthetravelandtourismindustryintheworld’smostimportantcountries.The“Travelandtourismcompetitivenessreport2015”measuresaseriesofelementsandpolicymeasuresthatallowforthe industry’ssustainable development, thereby contributing to a country’s economic developmentandcompetitiveness.Thecurrentreportcovers141countries,forwhich14pillarsarejudged andmeasured in terms of 90 indicators. The final score gauges the industry’sdegree of competitiveness and development by analyzing several different pillars likeinfrastructure quality, international openness, price competitiveness, labour industryqualification, regulatory environment and state policy, development of the tourismindustry,culturalresources,businessenvironment,safety,andaccesstobasicservices,amongothers.Italsohasindividualscoresandrankingsforeachpillarorindicator.Theend purpose of the report is to provide countries with a strategic platform andcomparative tool (benchmarking) for use by businessmen and politicians to secureappropriatedevelopmentofthetravelandtourismindustryineachcountry.ThatreportestimatesthattheSAMRegion’stravelandtourismGDPamountstoUS$134billion.Theindustryalsoemploysatotalof5.4millionpeople.Itshouldbestatedherethat the territory of French Guiana is not a part of the sample thatwas analyzed. Inaddition and specifically for 2015, the report did not include Ecuador becauseinformationwaslacking.

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Charts 3.2.3 – Impact of the aviation industry on the SAM Region

TourismandtravelGDP,bycountry–SAMRegionTourismandtravelemployment,bycountry–SAMRegion(millionsofUS$):…Panama…Brazil (millionsofUS$):…Panama…BrazilSource:WorldEconomicForum

TheGeneral Competitiveness Index of the Industry revealed that the SAMRegion stillhasagreatpotentialfordevelopment.Inthe141countrysample,Brazil ledtheregionand ranked among the top 30 economies in terms of the economic and socialsustainabilityofitstravelandtourismindustry.WithintheSAMRegion,Brazil(position28) and Panama (position 34) led the ranking, while Venezuela (position 110) andParaguay (position 113) were the countries showing the least development of theindustryanditsenvironment.Insofar as the specific quality of air transport infrastructure was concerned (rangingfrom0to7, inwhich7 isextensiveandefficientand0extremelypoorlydeveloped),alarge part of the region still showed plenty of room to work on air transportinfrastructurequalityandsufficiency.With theexceptionofPanama,whichreceivedafairlypromisingscoreofover6and,toalesserextent,ChileandEcuador,withscoresofmorethan5,mostcountriesintheregionreceivedanaverageinfrastructureratingof4orless(seechartabove). Tables 3.2.1 – Competitiveness index of the industry and infrastructure quality General Competitiveness Index of the industry

WEF Travel and Tourism Competitiveness Report 2015

Country Score Ranking

Brazil; Panama; … *Score range of 0 to 7. General average for 14 pillars.

Indicator of the quality of air transport infrastructure

WEF Travel and Tourism Competitiveness Report 2015

Country Score Ranking

Panama; …Brazil

*Score range of 0 to 7, where 0 is extremely poorly developed and 7 is extensive and efficient

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Source: WEF (World Economic Forum)

Tables 3.2.2 – Indicators of ASA openness and airport costs

ASA openness level indicator WEF Travel and Tourism Competitiveness Report 2015

Country Score Ranking: Panama Brazil

*Score range from 0 to 38, where 0 is more restricted and 38 more liberal

Indicator of airport taxes and charges WEF Travel and Tourism Competitiveness Report 2015

Country Score Ranking: Panama Brazil

*Score range of 0 to 100, where 0 is the highest cost and 100 the lowest

Source: WEF (World Economic Forum)

Inthecaseoftheregulatoryenvironment,thespecificindexofthelevelofopennessofeach country’s bilateral agreements (ASAs) also shows that domestic protectionism isstillwidespreadwithintheregion.Onascaleof0to38(0beingmorerestrictedand38,moreliberal)alloftheregion’scountriesscoredbelow20,Panama(inthe15thpositionatthegloballevel)beingthemostliberalandVenezuela(inthe88thposition),themostrestrictive.Toconclude,itisimportanttomentiontheregion’sratinginsofarasairfaretickettaxesand airport charges to consumers are concerned. The region is generally known for

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having countries with high costs compared with the rest of the world (most occupypositions70andonup),except forUruguay,GuyanaandChile,whichoccupythe15th,24th and 51st positions, respectively. Attention should be drawn to the case of Peru,which has the highest airfare ticket taxes and airport costs of the entire region andoccupiesoneofthefinalpositionsintheranking(position134).

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3.3. SWOTAnalysisofAirConnectivityintheSAMRegionBelowisasummaryofthedistinguishingcharacteristicsoftheaviationindustryintheregion,aspectstobeimprovedandthepossiblenegativeorpositiveeffectoftheinfluencingenvironment:Table 3.3.1 –SWOT Analysis

Strengths

Industrystrengthsatthegloballevel Most securemeansof transport at theglobal level. In2015,when3.6billionpassengerswere transported, theperpassengerdeath ratewas0.0000002(thelikelihoodofcarorshipaccidentsis50timeshigher).

Oneofthemostregulatedindustriesatthegloballevel,accordingtotheChicagoandMontrealConventions.

Continuousinnovations insafety,speed,service improvementsandreductionintheenvironmental impactenhancethepopulation’swell‐beingandStateeconomicprosperity.

Adoptionofaglobalcommitmenttofightclimatechangeinfavourofasustainableindustry.

SAMRegionstrengths Geographiclocationinrelationtotheothercontinents.

Socialstabilityinalmostalloftheregion’sStates.

Theregion’seconomicpotentialmaintainspositivegrowthprospectswithprojectedGDPgrowthabovethe3.6%globalaveragefor theperiod2016‐2021in10ofthe14States.

Sustainablegrowth industry: over thepast20years, thenumberofpassengers transported in theregionhasexpanded3.5‐fold foranannualaverageof7.9%.(Source:WorldBank)

Centresoftouristattractioncontributetoeconomicgrowthandthecreationofemployment. SAMRegion: travelandtourismindustryGDPofapproximatelyUS$134billionand5.2millionjobs.(Source:WEF)

Centresofeconomicinvestmentgeneratedevelopmentandgrowthprospectsthattriggerforeignanddomesticinvestment.

Theregion’sbiodiversityisanimportantassetforecotourismdevelopment.

FiveoftheSAMStateshaveshownthegreatestopennesstothedevelopmentofnationalaviationwiththeparticipationofforeigncapital.ThishasmotivatedtheconsolidationofimportantregionalgroupslikeLATAM,AviancaandCopa.

Theoperationofcargoflightsintheregionfrom/totheUnitedStatesandEurope(FTAagreements)haveincreasedinrecentyearsandaccordingDRAFT

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totheBoeing2014‐2015report,bi‐directionalgrowthof5%perannumisprojectedat2032.

Increaseininterlineagreementsofferconsumersbetterconnectionsandfares.

Partnershipsbetweenairlinesofthesamecountryandoftheregion(codesharing)optimizeoperationsandimprovetheconnectivitynetwork.

The entry of “low‐cost” airlines promotes better fares and a better route and frequency offering and develops traffic between city pairs insecondaryairportsthatarenotviablewithintheconventionalaircraftsystem.

Existenceof(certified)pilotschoolsin7Statesintheregionfacilitatesthetrainingofnewpilotgenerationsintheregion.

Opportunities

Growthoftheglobaldemandfortourism.

EconomicgrowthofStateslikeChinaandIndiaandoftheAsia‐PacificRegion.

Tradeglobalization.

InterestofforeignairlinesinparticipatingintheestablishmentofnewnationalairlineswithineachState.

Newgovernmentpolicycontextofgreateropennesstoaviation.

API(AdvancedPassengerInformation)technologyforimmigrationprocessesusingsecure,codedelectronictransmissionswithagreatercapacityforhousingpassengerdata.

Baggagedrop‐offservicetechnology.

Moreadvancedtechnologyforpassengerpre‐embarkationsecuritycontrols(AVSEC).

SimplificationofCustomsregulations(takingadvantageofe‐AWB+e‐Freight).

Contextofgreateropennesstotradeinmostoftheregion’scountriesinordertoreviewtheASAs(bilateralandmultilateral).

Incorporationofmultimodaltransportforaircargo.

Differentfreetradeagreementsandpartnershipsinsideandoutsidetheregion.

TourismagreementsandintegrationwithoneormoreoftheRegion’sStatestoattracttourismfromdistantcountries.

Weaknesses

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Reducedpenetrationoftheindustryincomparisonwithotherregions.

Lowairlineprofitmargins.

Airportcostsandchargesarehighinmostoftheregion’scountries.

Reactiveratherthanproactivemanagementfavouredininfrastructuredevelopment.

MostofthecountriesstillhaveairfareticketssubjecttoVAT(casesofColombia,Ecuador,PeruandArgentina).

Failure toupdateAirportMasterPlans to cover theexistingandprojectedpassengerdemand,particularlyduring “peak”hours, contributes toflightdelaysandlimitstheincreaseinnewfrequencies.

Slowairportcheck‐in,security,customs,immigrationandembarkationprocesses.ExistingtechnologiesstillrequiresimplificationandadoptionthroughtheFAL(Annex9)andAVSEC(Annex17)committees.

The existence of consumer protection regulations additional to the international Air Transport Contract (Chicago andMontreal Conventions)hampersthecommercialdevelopmentofairlinesbydisincentivatinglow‐costpromotions.

Currentcustomsproceduresdelayexportandprocessmanagementofaeronauticalmaterialdeposits.

Locationofmainairportsincitycentres,vehiclecongestionandthepoorstateofroadinfrastructure.

Bilateralandmultilateralagreements(ASAs)continuetooperatewithinanenvironmentofregulatoryprotectionismandhavenotbeenbroughtintolinewiththenewmarketconditionsandcharacteristicsofthepresentglobalizationprocess.

Threats

Unforeseeableterroristactshaveanegativeimpactonthesecurityoftheindustry.

Globaleconomiccrisisorrecession.

Communicablediseases.

Fluctuationsinoilpricesraiseindustrycosts.

Citizeninsecurityjeopardizespassengerassetsandsecurityandhasanegativeimpactontraffictotheterritory.

Drugtrafficking.

Climatechangeand/ornaturaldisasters.DRAFT

4. Socio‐economicconditionsandsituationoftheaviationindustry,byState

4.1. ArgentinaGeneralDescriptionArgentina isoneof the largesteconomies in theSAMRegion, ranking third in termsofpopulation (43million inhabitants) and second in total GDP (US$ 586 billion). Its percapita GDP (US$ 13.6 thousand) situates it among the 3 countries in the SAM RegionclassifiedbytheWorldBankas“high‐income”economies.ArgentinaandBrazilaretheonly countries in the region that belong to the G‐20 Group13. Its natural and culturalwealthpositionitasoneoftheregion’smaintouristdestinations. Argentinapossesses10ofUNESCO’srecognizedWorldHeritagesites(4naturaland6cultural).Furthermore,itspopulationisalsoknowntohaveoneoftheregion’shighestliteracyrates.Charts 4.1.1 – Main macroeconomic indicators and GDP evolution

Principalmacroeconomicindicators

GDP – US$ billion; GDP growth 2010‐2015 – Annualaverage;PercapitaGDP–US$percapita;Population–Million;Unemploymentrate(2014);Inflation(2014);International trade (2014) ‐ % of GDP; Spending ontourism(2014)‐US$billion;TravelandTourism(%ofGDP)‐WEF2015Report

EvolutionoftotalandpercapitaGDP Billionsofpesos‐GDP‐PercapitaGDPThousandsofpesos

Source:IMFItseconomyisunderpinnedbyabroadarrayofnaturalresourceswithsignificantlarge‐scale development of agriculture and stockbreeding. It is one of the world’s largestexportersofmeat,sunflowers,soybeans, lemons,apples,wheat,andwool,amongotherproducts. It is also a regional leader in the production of natural gas, oil and othermineralslikelead,zincandgold.In2014,accordingtotheWorldBank,Argentina’sexportstotalledUS$81billion(14.8%of its GDP), but since then have followed a decreasing trend. Global recession withdroppingcommodityprices,combinedwithArgentina’sinflationofover20%ayearasaresult of exchange rate differentials and high tax pressure together with greaterregulationofforeigntrade,areresponsibleinpartforthisdeclineinexports.Atthesametime,itstotalforeigntrade(exports+imports)accountedfor29.3%ofitsGDP.

13Internationalcooperationforumconsistingoftheworld’s20mostindustrializedandimportanteconomieswhosepurposeistoaddresspolicy,financialreformandglobaleconomicdevelopmentissues.

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According to theWorldBank, spendingon tourism in2014amounted toUS$7billion.Total inbound tourists were calculated at 5.9 million, up 13.1% on the figure for thepreviousyear.Outboundtourists,fortheirpart,totalled6.5million(‐3.4%lessthanthepreviousyear).IATA’sAirlatinNews(ALN)publicationrevealsthatapproximately70%ofthevisitorscamefromSouthAmerica.Charts 4.1.2 – Exports and number of tourists

Evolutionofexportsofgoodsandservices EvolutioninnumberoftouristsUS$billions‐Exports(US$)‐Exports(%ofGDP) Millions‐Inboundtourists‐Outboundtourists

Source:WBAirConnectivityCharts 4.1.3 – Main aviation industry data Operationaldata–AviationIndustry in2015

Numberofairports45Airlineswithdirectroutes(Sept2016)29Numberofinternationalroutes*84Numberofcountriesofdirectdestination26Numberofpassengers20.8million‐Domestic9.8million‐International11millionNumberofflights194.8thousandSAMRegion(%ofinternationaltraffic)53%*IncludesdirectrouteswithorwithoutstopsMainairlineswithflightsinsideandto/from

Argentina

MapofArgentina’s domesticconnectivity

CHILE

PARAGUAY BRASIL

BOLIVIA

URUGUAY

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Airlines:Aerolineas….OthersPassengersin2015%share

Source: IATA

ICAO figures reveal that Argentina has 45 operating airports, 16 of which areinternational.Ministro Pistarini de Ezeiza (EZE) International Airport and AeroparqueMetropolitano Jorge Newbery (AEP), located in the capital city of Buenos Aires,concentratethelargestpercentagesofpassengertrafficandaccountedfor39%and29%,respectively, in2015.According to IATA,89%of the touristsarrivedbyair (comparedwiththeworldaverageof54%).A total of 20.7 million passengers were transported over Argentina’s domestic andinternationalroutesin2015,or7.4%morethanthepreviousyear.Overthepast5years(2010‐2015),thenumberofpassengershasrisen4.9%onaverageperyear.The seating capacity in2015on routes to/fromand insideArgentinawas28.5million,which, considering the total number of passengers that flewdirect and indirect routes(20.8million),gaveanoccupancyrateofapproximately73%.Charts 4.1.4 – Evolution in the number of passengers, flights and available seats

Evolutioninthenumberofpassengers Availableseatsandnumberofflightstoprincipaldestinationsin2015

Millions‐Passengersoninternationalflights‐ Millionsofavailableseatsflights27,289…flights….

Passengersondomesticflights Brazil;Chile;UnitedStates;Spain;…Italy

Source:IATA

IATA records show that in 2015 a total of 29 commercial airlines operated scheduleddirect and indirect flights from/to and inside the country, with 74% of the trafficcorrespondingtodirectflightsoroneswithimmediateconnections.Furthermore,53%of

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the traffic consisted of international flights and 47% of domestic flights. Traffic to theSAMRegionaccountsfor53%oftotalinternationaltrafficto/fromArgentina.

Insofar as countries of destination are concerned, 26were connected directly,with orwithoutstops,toArgentinaover84internationalroutes.IntheSAMRegion,thecountrywasdirectlyconnectednon‐stopwith77%oftheStates:Brazil,Bolivia,Chile,Colombia,Ecuador,Panama,Paraguay,Peru,UruguayandVenezuela.

Charts 4.1.5 – Main countries connected with Argentina

Maindestinations/originsofdirectand MaincountrieswithdirectroutestoArgentinaindirectroutestoArgentina

Thousandsofpassengers:Brazil;UnitedStates;…Spain;…Italy; Thousandsofpassengers:Brazil;…UnitedStates;Spain;….DominicanRepublic Source:IATA

Outofthetotalinternationalairtraffic(directandindirect),Brazil,theUnitedStatesandChile have the greatest connectivity with Argentina and accounted for 50% of thecountry’s totalairpassengertrafficof2015(24.2%,15.9%and10.0%of totaltraffic in2015, respectively). Considering direct routes only, Brazil, Chile and the United Statesconstitute themain routes and together represented 60% of the total traffic on directroutesin2015(27.3%,17.6%and15.6%,respectively).The main airlines with direct and indirect flights inside and outside Argentina areAerolíneasArgentinas,whichtransportedalmostone‐halfofthetotalpassengersin2015(48.1%),followedbyLATAMAirlinesGroup14with18.4%andtrailedbyGOLTransporteAéreosinthirdplacewith4.6%.Figure 4.1.1. – Map of Argentina’s passenger air transport connectivity with the world

14DoesnotincludealloftheairlinesassociatedwiththeLATAMGroup.ThedatabaseprovidedbyIATAincorporatesChileandPeruunderthatheading(LATAMAirlinesGroup).TherestoftheGroupcompaniesareregisteredindividually.

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CANADA REINO UNIDOALEMANIA

ITALIATURQUIA

NUEVA ZELANDA

QATAR

FALKLAN ISLAND

MEXICOR. DOMINICANACUBA

CHILE

EEUU

EMIRATOS ARABES

PERU BRASIL

ARGENTINA

ESPAÑA

PANAMAVENEZUELA

COLOMBIA

ECUADOR

BOLIVIA

PARAGUAY

URUGUAY

HOLANDAFRANCIA

Source:IATA.Prepared:In‐house

ThemapaboveshowsallofArgentina’sdirectrouteswiththeworld.Inordertobeabletooperate those routes,airlinesrequireoperating licenses to flybetween thepointsoforiginanddestinationfordirectflightswithorwithoutstops.Directnon‐stoproutesareshowninblueandthosewithstopsinred.AnnexAlistsallofthedirectnon‐stoproutesbyairport.Inthecaseofinternationalaircargo,accordingtodataobtainedfromIATA,atotalof55thousand tonnes (‐16.2% less than the previous year) were transported. It should bestressedthatthosefiguresconsideronlythetonnesreportedbyairlinesbelongingtotheCASS (CargoAccounts Settlement Systems)programme. Itsmain tradingpartner inairtransport terms is theUnited States,which accounted for41%.Theotherdestinationsaremoreequallydistributedamongseveralcountries,particularlyGermany,Chile,Brazil,theUnitedKingdomandMexicowith6%each.

Charts 4.1.6 – Main air cargo figures

EvolutionofaircargooriginatinginArgentinaMainaircargodestinationsin2015Thousandsoftonnes U.S.41%;Germany6%;…Brazil6%;UnitedKingdom6%;

…Spain5%;…Others12%

CompetitivenessoftheIndustry

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In the World Economic Forum competitiveness ranking, Argentina occupied the 57thpositionoutofatotalof141countriesanalyzedintermsofthecompetitivenessoftheirtravelandtourismindustries in2015.A lookatsomeindividual indicatorsreveals thatArgentina still shows room for improvement in the quality of its air transportinfrastructureanddomestictransportsystem,andinreducingitsairportcosts,whicharehighincomparisonwithothercountriesintheworld.

Table4.1.1.Competitivenessofthetravelandtourismindustryin2015

ScorerangeScoreRankingTravelandtourismcompetitivenessindexSpecificindicators(scorerange)PrioritizationoftheindustrybythegovernmentEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetworkVisarequirementsOpennessofbilateralserviceagreements(ASAs)Airfaretickettaxesandairportcharges

Source:WEF

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SWOTAnalysis–Argentina’sConnectivity

Strengths

Geographiclocationandterritorialsize. NewStatepolicypermittingforeigninvestmentinnationalairlines. Decentralizedoperationofnationalandinternationalflightsfromothercitiesinthecountry.(Rosario‐PanamaandRosario‐Lima,Salta–Lima,andCórdoba‐Lima)

Centreoftouristattractionfortheregionandfortheworld. OperationsofhubairportsinBuenosAiresandonesoontoopeninCórdoba. IncreaseinMontevideo‐BuenosAiresshuttleoperations. OperationsofairlinegroupslikeAviancaandLATAM. Agreementswithcountriesintheregionandintherestoftheworld(Mexico,Canada)toincreasepassengerairtraffic. AerolíneasArgentinas,amemberoftheSkyTeamAlliance(13airlines)hassignedacode‐sharingagreementwithKLM/AirFranceandplanstoincreaseitsofferinginArgentina.

PartnershipstostrengthenconnectivitybetweenArgentinaandBrazil.(AerolíneasArgentinas‐Gol) Universities,studycentresandpilotschoolsforthetrainingofaviationprofessionals. SigningoftheFortalezaAgreementcontaininganopenskiespolicyintheregion.

Opportunities

Growthoftheglobaldemandfortourism. EconomicgrowthofStateslikeChinaandIndiaandoftheAsia‐PacificRegion. Tradeglobalization. Greaterpassengerdemandiftaxesarereduced. Interestofforeignairlinesininvestinginnationalaviation. API(AdvancedPassengerInformation)technologyforimmigrationprocessingusingsecure,encryptedelectronictransmissionswithagreatercapacityforhousingpassengerinformation.

Industrytechnologytofacilitateairportcheck‐in,immigrationandsecuritycontrolservices. Simplificationofcustomsregulations(adoptionofe‐AWB+e‐Freight). Greatertradeopennesstowardliberalizationoftheair. Multimodalcargotransport. Agreementsandintegrationwithoneormoreoftheregion’sStatestoattracttourismfromdistantcountries.DRAFT

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Weaknesses

Highairportchargesandtaxes Airfare tickets are subject to VAT, passengers pay Airport User Charges and taxes for the development of infrastructure, security,customsandimmigration.

Reactive, rather than proactive, management in the development of airport infrastructure that is reflected in Buenos Aires’s mainairportsbyagrowingdemandformorecapacity.

Inefficientequipment,suchasradioaids,inmanyofthecountry’sairports,requiringreplacementandsizeableStateinvestments. Sectorpolicycoordinationisneededforbetterdevelopmentofairportmasterplans. Improvementsinairnavigationtechnologyfortrafficmanagementduring“peak”hours. Slowairportcheck‐in,security,customs,immigrationandembarkationprocesses. Bilateralandmultilateral(ASA)agreementscontinuetooperatewithinanenvironmentofregulatoryprotectionismthatisnotinlinewithcurrentmarketconditionsandtheglobalizationprocess.

TheWorldTradeOrganization(WTO)attributedanAirLiberalizationIndexof8.56(2013)onascaleof0‐50(thehighertheindex,thegreatertheliberalization)toArgentina

Threats

Unforeseeableactsofterrorismhaveanegativeimpactonthesecurityoftheindustry. Globaleconomiccrisisorrecession,oilprices. Communicablediseases. Fluctuationsinoilpricesraiseindustrycosts. Climatechangeandnaturaldisasters.

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4.2. BoliviaGeneralDescriptionBolivia, whose official name is the “Plurinational State of Bolivia,” is geographicallysituated near the centre of the South American continent and has a population of 11million people. Its GDP is US$ 33 billion and its per capita GDP is US$ 2.8 thousand,placing it in the World Bank’s latest income classification in the category of “lowermiddle‐income”economy.Itshouldbestressedthatthankstoaprudenteconomicpolicyand thehighpriceof rawmaterials,Boliviawasamong the region’s countrieswith themostheavilygrowingGDPs(averageannualgrowthin2004‐2014of4.9%,accordingtotheWorldBank). Furthermore, itsnatural andculturalwealthmake it amajor touristattraction; it owns 7 of UNESCO’s recognized World Heritage sites (6 natural and 1cultural).Charts 4.2.1 – Main macroeconomic indicators and GDP evolution

Evolution of total and per capita GDP

Mainmacroeconomicindicators

GDP(2015)‐US$billion;GDPgrowth2010‐2015‐Annualaverage;PercapitaGDP(2015)–US$percapita;Population(2015)–Million;Unemploymentrate(2014);Inflation(2014);Internationaltrade(2014)‐%ofGDP;Spendingontourism(2014)–US$billion;Travelandtourism(%ofGDP)–WEF2015Report

Bsbillions‐GDP‐PercapitaGDPBSthousands

Source: IMF, WB and WEF. Latest available data Source: IMF

Itseconomyreliesmostlyon theextractionof rawmaterials,particularlyminerals liketin,zinc,silverandcopper.Furthermore,muchofitsincomecomesfromtheexploitationofoneoftheregion’slargestnaturalgasreserves,whichisexportedmainlytoBrazilandArgentina.Attentionshouldalsobecalled toBolivia’sprominentpositionasoneof theworld’smostdevelopedmicrofinancecentres.AccordingtoinformationpublishedbytheWorldBank,in2014,Boliviaexportedatotalof US$14 billion, representing 43.3% of its GDP. In recent years, its exports havefollowedanimportantupwardtrendwithaverageannualgrowthin2010‐2014of8.5%.Its total international trade(exports+ imports), furthermore,accounts for85.3%of itsGDP.AgainaccordingtotheWorldBank,thecountry’stotalspendingontourismin2014wasUS$ 1 billion. A total of 871 thousand people were inbound tourists, up 9.1% on thefigure for the previous year, while the outbound tourists amounted to 932 thousand(11.4%morethanin2013).

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Charts 4.2.2 – Exports and number of tourists

EvolutionofexportsofgoodsandservicesEvolutioninnumberoftouristsUS$billions‐Exports(US$)‐Exports(%ofGDP) Millions‐Inboundtourists‐OutboundtouristsSource:WB

AirconnectivityCharts 4.2.3 – Main aviation industry data Operationaldata–AviationIndustry 2015

‐Number of airports; ‐Airlines with direct routes (Sept2016); ‐Number of international routes*; ‐Number ofcountries of direct destination; ‐Number of passengersmillion: ‐domestic million; ‐international million; ‐Number of flights thousand; ‐SAM Region (% ofinternationaltraffic)*IncludesdirectrouteswithorwithoutstopsMainairlineswithflightsinsideandto/fromBolivia

Airlinepassengersin2011%share…Others

Source: IATA

MapofBolivia’s domesticconnectivity

PERU

CHILE

BOLIVIA

ECUADOR

PARAGUAY

BRASIL

CYARIB

VVI

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Bolivia has a total of 15 operating airports, of which, according to ICAO, 3 areinternational airports. Viru Viru International Airport (VVI) in Santa Cruz and El AltoInternationalAirport inLaPaz concentrate themajor shareofpassenger traffic,whichamountedin2015to34%and32%,respectively.Atotalof4.8millionpassengersweretransportedtoBolivianinternationalanddomesticdestinations in2015, foragrowthof8.2%comparedwith thepreviousyear. Overthepast5years(2010‐2015),thenumberofpassengershasrisenanaverageof11.1%peryear.Insofarasavailableseatsareconcerned,in2015,routesflownto/fromandinsideBoliviahadanavailablecapacityof6.7millionseatswhich,consideringthetotalnumberofpassengersondirectand indirectroutes(4.8million), revealedanoccupancyrateofapproximately72%.Charts 4.2.4 – Evolution in the number of passengers, flights and available seats

Evolutioninthenumberofpassengers Available seats and number of flights to directMillions‐Passengersoninternationalflights‐Passengersondomesticflights destinationsin2015Thousandsofavailableseats Flights;…UnitedStates;…SpainSource:IATA

AccordingtoIATArecords,in2015,atotalof15commercialairlinesoperatedscheduleddirect and indirect flights from/to and inside the country, with 83% of the trafficconsistingofdirectroutesoroneswithanimmediateconnection.Furthermore,17%ofthe traffic corresponded to international flights and the remaining 83% to domesticflights.Intermsofcountriesofdestination,10weredirectlyconnectedwithBolivia,withorwithoutstops,over36 internationalroutes. In theSAMRegion,whichaccountedfor60%of the total international traffic to/fromBolivia, the country is connecteddirectlywithout stopswith54%of theStates:Argentina,Brazil, Chile,Colombia,Peru,PanamaandParaguay.Charts 4.2.5 – Main countries connected with Bolivia

Main destinations/origins of direct and indirect Main countries with direct routes to Bolivia routes to Bolivia

Thousands of passengers Thousands of passengers

-U.S.;…Brazil;…Spain;…Dominican Republic Brazil; U.S.; Spain

Source: IATA

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Out of its total international (direct and indirect) air traffic, United States, Peru andArgentina are the countrieswith themost connectivitywithBolivia and accounted forover44%ofthecountry’stotalpassengerairtrafficin2015(16.5%,13.8%and13.7%ofthetotalairtrafficof2015,respectively).Consideringonlythedirectroutes,Peru,Chileand Argentina represent the most important and together were responsible for morethan 57% of the total traffic over direct routes in 2015 (23.1%, 17.2% and 17.2%,respectively).The main airlines with direct and indirect flights inside and outside Bolivia are, first,BolivianadeAviaciónwithashareofoverone‐half the totalpassengers transported in2015(54.6%),second,Amazonaswith13.4%andthird,LíneaAéreaEcojetwith8.3%.

Figure 4.1.1. – Map of Bolivia’s passenger air transport connectivity with the world

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CHILE

EEUU

ESPAÑA

BRASIL

URUGUAY

ARGENTINA

PERU

COLOMBIA

PANAMA

BOLIVIA

PARAGUAY


TheabovemapshowsallofBolivia’sdirectrouteswiththeworld.Inordertobeabletooperate those routes, airlines require operating licenses to fly between the points oforiginanddestination fordirect flightswithandwithoutstops. Directnon‐stop flightsareshowninblueandthosewithstopsinred.AnnexAlistsalldirectnon‐stopflightsbyairport.

Insofar as air cargo is concerned, according to data published by IATA, a total of 6thousand tonnes were transported at both the domestic and international levels. Itshould be stressed that air connectivity is very important inside Bolivia because of itsruggedterrainandlackofaccesstotheocean(97%ofthecargotransportedisdomestic).Ininternationalterms,itsprincipaltradingpartneristheUnitedStates,whichaccountsfor90%,followedbyPeruwith4%andChileinthirdplacewith3%.


Evolution of domestic and international International air cargo destinations in 2015

air cargo originating in Bolivia

Thousands of tonnes U.S. 90%…..Others 4%

Source: IATA

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Source:IATA

CompetitivenessoftheIndustryIn theWorld Economic Forum competitiveness ranking, in 2015, Bolivia occupied the100thpositionoutofatotalof141countriesanalyzedintermsofthecompetitivenessoftheirtravelandtourismindustries. Generallyspeaking,Bolivia ispositionedbelowthemedian of the countries analyzed, except in regard to the visa requirement indicator,whereitranks28thbecauseofagreateropennesstoforeignvisitors.Thegovernment’sprioritization of the industry,marketing andbranding to attract tourists, quality of airtransportinfrastructureanddomestictransportnetworkandlevelofairportchargesarethe areas requiring further efforts to improve its industry’s competitiveness andconnectivity.

Table4.2.1.Competitivenessofthetravelandtourismindustryin2015

ScorerangeScoreRankingTravelandtourismcompetitivenessindexSpecificindicators(scorerange)PrioritizationbythegovernmentoftheindustryEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetworkVisarequirementsOpennessofbilateralserviceagreements(ASAs)AirfaretickettaxesandairportchargesSource:WEF

DRAFT

SWOTAnalysis–Bolivia’sConnectivity

Strengths

Its geographic location at the centre of South America makes it highly dependent on the development of its air connectivity withadjacentcountriesintheRegionandwiththeworld.

Governmentpolicyforthedevelopmentofaviationwithinaprocessofchangeandopening. Entryof threenationalairlines into themarketduring thepastdecade. Twoof themoperatedomestic flightsand flights inside theRegionandoneairlinebelongstotheStateandoperatesdomesticflightsandflightstotheRegion,theU.S.andEurope.

OperationsinSantaCruzwithouthighaltituderestrictions. Arrivalofforeigntouristsbyairbecauseofthecountry’sgeographicdiversityandculturalwealth. Licensedpilottrainingcentre. DevelopmentplanforthehubairportinSantaCruz,withinvestmentsforpassengerandaircargoterminalsthatwillofferconnectionsbetweentheAtlanticandPacificcoasts.

Opportunities

Growthintheglobaldemandfortourism. EconomicgrowthofStateslikeChinaandIndiaandoftheAsia‐PacificRegion. Tradeglobalization. Developmentofhubairports. API (Advanced Passenger Information) technology for immigration processes using secure encrypted electronic transmissions thathaveagreatercapacityforhousingpassengerdata.

Industrytechnologythat facilitatesandsimplifiespassengercheck‐inandembarkationusingrapid immigrationandsecuritycontrolprocesses.

Alliancesandpartnershipswiththeregion’sairlines(codesharing) Investmentintechnologyandsafety. Multimodalcargotransport. Cooperation(code‐sharing)agreementswithairlinesofadjacentcountries. IntegrationagreementswithoneormoreoftheRegion’sStatestojointlyattracttourismfromdistantcountries. NavigationinfrastructuretosupportPBMandGNSSprecisionapproachoperations.DRAFT

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Weaknesses

Airindustrypenetrationislimitedinhighaltitudeairports. RestrictionsonvarioustypesofexportsfailtoencouragenewcargooperationsinthefutureViruViruInternationalcargoterminal. NeedtoprioritizeaStatepolicythatisnonexistentatthistimeandthatwouldmodernizeandboostBoliviantourismthroughouttheworld.

International and domestic airfare tickets are subject to the payment of VAT and to airport charges. There is a departure tax oninternationalflighttickets.(SourceTTBSIATA)

Proposaltoaddpassengerchargesthroughatourismtaxandanincreaseinalreadyexistingchargesandtaxes. Bilateralandmultilateralairserviceagreements (ASAs)continuetooperatewithinanenvironmentof regulatoryprotectionismandhavenotbeenadjusted tonewmarket conditions and characteristicsof theongoingglobalizationprocess that is leading togreaterliberalization.

TheWorldTradeOrganization(WTO)attributedan“AirLiberalizationIndex”of8‐69(2013)toBoliviaonascaleof0‐50(thehighertheindex,thegreatertheliberalization).

TheparticipationofState‐ownedcommercialairlinesfailstoincentivatemoreprivateinvestmentinnewairlines.

Threats

Unforeseeableterroristactshaveanegativeimpactonthesecurityoftheindustry. Globaleconomiccrisisorrecession. Communicablediseases. Fluctuationsinoilpricesraiseindustrycosts. Drugtrafficking. Climatechangeandnaturaldisasters. DRAFT

4.3. BrazilGeneralDescriptionBrazilisthelargesteconomyintheSAMRegionandthefifthlargestintheworldintermsof area and has close to 50% of the population of the SAM Region, with 204 millioninhabitants. Its total GDP is also the region’s largest, at US$ 1,773 billion, and its percapitaGDP (US$8.7 thousand) places it among the “uppermiddle‐income” economies,according to the World Bank classification. Brazil and Argentina are also the onlycountriesintheregionthatbelongtotheG‐20Group15.Itswidebiodiversityandnaturalandculturalwealthpositionitamongtheregion’sprimarytouristdestinations,with20oftherecognizedUNESCOWorldHeritagesites(7naturaland13cultural).Charts 4.3.1 – Main macroeconomic indicators and GDP evolution

Mainmacroeconomicindicators

GDP(2015)‐US$billion;GDPGrowth2010‐2015Averageannual;PercapitaGDP(2015)US$percapita;Population(2015)Million;‐Unemploymentrate(2014);Inflation(2015);Internationaltrade(2015)%ofGDP;Spendingontourism(2014)US$billion;‐Travelandtourism(%ofGDP)WEF2015ReportSource:IMF,WBandWEF.Latestavailabledata

EvolutionoftotalandpercapitaGDP R$Billions‐GDP‐PercapitaGDPR$ThousandsSource:IMF

Its economy is driven by several different sectors, among them agriculture, mining,manufacturingandservices.Unlikemanycountriesintheregion,Braziloffersasizeablecomponent ofmanufactured or semi‐manufactured exports. The Brazilian economy iswidely diversified with significant development of sectors like motor vehicles, steel,petrochemicals,aeronauticsandconsumerdurablesingeneral.Since the opening of this decade, Brazil has been undergoing a recession and hasexperiencedacontinuingeconomicslowdownwithaverageannualGDPgrowthovertheperiod 2010‐2015 of only 1.0%. Worsening that situation is a significant decline ininvestors’trust,significantexchangeratevariationsandinflationthatreached9%inthefinalyear.According to data published by the World Bank, in 2015, Brazil exported a total ofUS$231 billion, representing 13.0% of its GDP. Its total international trade (exports +imports)amountedtoto27.4%ofitsGDP.Totalspendingontourismin2014wasUS$

15Internationalcooperationforumconsistingof20ofthemostindustrializedandimportanteconomiesintheworldthataddressespolicyissues,financialreformsandglobaleconomicdevelopment.

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30 billion. Inbound tourists totalled 6.4million, up 10.6% on the previous year,whileoutboundtouristsnumbered9.0million.Charts 4.3.2 – Exports and number of tourists

EvolutionofexportsofgoodsandservicesEvolutioninnumberoftouristsUS$billions‐Exports(US$)‐Exports(%ofGDP) Millions‐Inboundtourists‐OutboundtouristsSource:WB

AirconnectivityCharts 4.3.3 – Main aviation industry data

Operationaldata–AviationIndustry2015

‐Numberofairports; ‐Airlineswithdirectroutes(Sept2016);Numberofinternationalroutes*;‐Number of countries of direct destination; ‐Number of passengers – million; : Domesticmillion;Internationalmillion;‐Numberofflights1million;SAMRegion(%ofinternationaltraffic);*Includesdirectrouteswithandwithoutstops

Mainairlineswithflightsinsideandto/fromBrazil

AirlinePassengersin2015%share…Others

Source: IATA

MapofBrazil’s domesticconnectivity

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Brazilhasatotalof107airportsoperatingatthenationalleveland,accordingtoICAO,29of theseare international.SãoPaulo‐Guarulhos (GRU) InternationalAirportandGaleão(GIG) International Airport, located in Sao Paulo and Rio de Janeiro, respectively,concentratethegreaterpartofthepassengertrafficandaccountedin2015for17%and9%, respectively.Generally speaking,Brazil’s air traffic iswelldecentralized,with its6mainairportsresponsibleforalittleover50%ofthetotalpassengertrafficin2015.

A total of 93.9 million passengers were transported from Brazil to international anddomestic destinations in 2015. Over the past 5 years (2010‐2015), the number ofpassengers has risen 5.6% on overage per year. Nonetheless, in 2015 specifically thenumberwas‐2.6%smallerthanthepreviousyear.Insofar as available seats are concerned, in 2015, the routes flown to/from and insideBrazilhadanavailableseatingcapacityof158million. Consideringthetotalnumberofpassengers (93.9 million) who flew direct and indirect Brazilian routes that year, theoccupancyratewasapproximately59%.Charts 4.3.4 – Evolution in the number of passengers, flights and available seats

Evolution in number of passengers and flights AvailableseatsandnumberofflightstoMillions‐Passengersoninternationalflights maindestinationsin2015

‐Passengersondomesticflights Millionsofavailableseats‐flights‐U.S;…‐Spain;‐Germany;‐France….

Source:IATAAccording to IATArecords,a totalof37commercialairlinesoperatedscheduleddirectand indirect flights to/fromand insidethecountry in2015,ofwhich70%of the trafficcorresponded todirect routes oroneswith immediate connections. At the same time,20%ofthetrafficconsistedof internationalflightsand80%,ofdomestic flights.TrafficwiththeSAMRegionaccountsfor30%oftheinternationaltrafficto/fromBrazil.

In terms of countries of destination, 42 were connected directly with Brazil, with orwithoutstops,via189internationalroutes.IntheSAMRegion,thecountryisconnecteddirectlywithoutstopsto92%oftheStates:Argentina,Bolivia,Chile,Colombia,Ecuador,FrenchGuiana,Suriname,Panama,Paraguay,Peru,UruguayandVenezuela.

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Charts 4.3.5 – Main countries connected with Brazil

Maindestinations/originsofdirectand MaincountrieswithdirectroutestoBrazilandindirectroutestoBrazilThousandsofpassengers‐U.S.;…‐Italy;‐France;‐Germany; Thousandsofpassengers‐U.S.;…‐France;‐UnitedKingdom;‐‐Spain;…‐UnitedKingdom ‐Spain;‐ColombiaSource:IATA

Outofitstotal(directandindirect)internationalairtraffic,theUnitedStates,Argentinaand Chile have themost connectivitywith Brazil and accounted for over 48% of totalpassenger air traffic in 2015 (28.1%, 13.7% and 6.3% of the total traffic of 2015,respectively). Consideringthedirectroutesonly,thesame3countriesrepresentedthemost important routes and together accounted for almost60%of the total traffic overdirectroutesin2015(29.4%,20.4%and9.4%,respectively).Themain airlineswith direct and indirect flights inside and outsideBrazil are LATAMAirlinesBrasilwitha28%shareofthetotalpassengersin2015,followedinsecondplacebyAzulLinhasAéreasBrasileiraswith17.3%andAviancaBrasilinthirdplacewith7.5%.

Figure 4.1.1. – Map of Brazilian passenger air transport connectivity with the world

CHILE

EEUU

MEXICO

CANADA

HOLANDAREINO UNIDO

ITALIA

SUIZA

TURQUIA

ANGOLA

SUDAFRICA

COREADEL SUR

TOGO

SINGAPUR

EMIRATOS ARABESQATAR

CHINA

ALEMANIA

ARGENTINA

PERU

BARBADOS

TRINIDAD Y TOBAGO

CUBAR.DOMINICANA

ECUADOR

BOLIVIA

URUGUAY

PARAGUAY

FRANCIA

ESPAÑA

MARRUECOS

PORTUGAL

PANAMA

GUYANA FRANCESA

CABO VERDE

COSTARICA

COLOMBIA SURINAMEETIOPIA

ARUBACURACAO

VENEZUELA

BRASIL


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ThemapaboveshowsallofBrazil’sdirectrouteswiththeworld.Inordertobeabletooperatethoseroutes,airlinesneedoperatinglicensestoflybetweenthepointsoforiginand destination for direct flights with and without stops. Direct non‐stop routes areshown in blue and direct routes with stops, in red. Annex A lists all direct non‐stoproutesbyairport.Insofarasinternationalaircargoisconcerned,accordingtodatarevealedbyIATA,atotalof182thousandtonnesofaircargoweretransported. Itshouldbestressedthatthosefigures consider only the tonnes reported by airlines belonging to the CASS (CargoAccounts Settlement Systems) programme. Its most important trading partner in airterms is the United States, with a 23% share. The other destinations are moredistributedamongdifferentcountries,particularlyPortugal,Germany,Chile,Mexico,theUnitedKingdom,Colombia,SpainandFrance.


EvolutionofaircargoofBrazilianorigin Mainaircargodestinationsin2015Thousandsoftonnes ‐U.S.23%;–Portugal;‐Germany9%;‐Mexico;‐United

Kingdom6%;‐Spain6%;‐Colombia;‐France5%;‐Others30%

Source:IATA

CompetitivenessoftheIndustryAccording to theWorld Economic Forum competitiveness ranking,Brazil occupied the28thpositionoutofatotalof141countriesanalyzedinregardtothecompetitivenessoftheirtravelandtourismindustriesin2015,makingittheleaderintheSAMRegion. Intermsof someindividualindicators, wecanseethatBrazilhasworktodotoimprovethequalityofitsairtransportinfrastructureanddomestictransportationnetworkandtoreviewthelevelofitsairportcoststobeabletofurtherimproveitsconnectivitylevel.Table4.3.1.–Competitivenessofthetravelandtourismindustryin2015

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ScorerangeScoreRankingTravelandtourismcompetitivenessindexSpecificindicators(scorerange)PrioritizationoftheindustrybythegovernmentEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetworkVisarequirementsOpennessofbilateralserviceagreements(ASAs)Airfaretickettaxesandairportcharges

Source:WEF

DRAFT

SWOTAnalysis–Brazil’sConnectivity

Strengths

AsSouthAmerica’smostextensiveterritory,itssizeandgeographiclocationareprivileged. ThelargestandmostpopulousStateintheregionwithapotentialmarketfavourabletothegrowthofitsconnectivity. MostofBrazil’scitiesareconnectedbyair. Knownforitstouristattractions,whichcontributetoitssocio‐economicgrowth. Newairportservicesprivatizationplan,withmorethan5airportsalreadyunderprivateconcession,includingGuarulhosinSaoPaulo,thelargestairportintheSAMRegionandtheonewiththeheaviesttraffic.

Alliancesandpartnershipsamongtheregion’sandworldairlinesoptimizeoperationsandhaveaddedtoBrazil’sconnectivity. Entryof“low‐cost”airlines. Sharedcodeagreementsbetweendomesticandinternationalairlines(AVBrasilandAirCanada) AgreementbetweenBrazilandUruguaytoestablishthefirstbinationalairport. Contributionofcommercialairlinesthatpromotetourismandecotourismintheworld. Pilotschoolthatfacilitatesthetrainingofnewgenerationsofprofessionalsintheregion.

Opportunities

Growthoftheglobaldemandfortourism. EconomicgrowthofStateslikeChinaandIndiaandoftheAsia‐PacificRegion. Tradeglobalization. Interestofforeignairlinesininvestinginnationalairlines. Newairportadministrationpolicy. Electronictechnologythatisincorporatedintoterminaldesign(passengercheck‐in). Multimodalaircargotransportation. Expansionofnationalairlines. SimplificationofCustomsregulationsfor“paperless”(e‐AWB‐e‐Freight)transport.

Weaknesses

Highairportcostsandcharges. NofreeWiFiinthemainairports. Newterminal intheGRUairport(SaoPaulo)stillhasastill limitedrunwaycapacity; locationofterminalsanda lackofconnectionbetweenthem. DRAFT

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TherunwaycapacityhasyettobeimprovedatCGHairport(SaoPaulo),withtheprincipaloperatorsrecommendingthehandlingofcommercialaviationoperationsonly.

Locationoftheprincipalairportsinthecitycentres,accesstotheroadnetworkandvehiclecongestion. LittleconnectivityoftheBrasiliaairport. Bilateralandmultilateralairservicesagreements(ASAs)continuetooperatewithinanenvironmentofregulatoryprotectionism. Dropininternationaltripsofnationalairlinesadverselyaffectedbytheeconomicsituation. InfrastructureinvestmentsinairportsbelongingtotheStatedependuponthenationalbudget. TheWTOWorldTradeOrganizationattributesanAirLiberalizationIndextoBrazilof10.17(2013)inarangeof0‐50(thehighertheindex,thegreatertheliberalization).

Threats

Unforeseeableterroristactshaveanegativeimpactonthesafetyoftheindustry. Globaleconomiccrisisorrecession. Communicablediseases. Fluctuationsinoilpricesraiseindustrycosts. Climatechangeandnaturaldisasters.

DRAFT

4.4. ChileGeneralDescriptionChileisoneofthemostadvancedandprosperouscountriesintheSAMRegion. Withapopulationborderingon18million,ithasatotalGDPofUS$240billionanditspercapitaGDP (US$13.3 thousandnominal) is the region’s highest in relative terms adjustedbyPPP. Thatprosperitysituatesthecountryamongthe3 intheSAMRegionclassifiedbytheWorldBankasa“high‐income”economy.Itisalsoacknowledgedtobeafinanciallydeveloped, freemarket countrywitha large internationalopening,making thecountryattractive to foreign investment. Today it has free trade and strategic commercialagreements in place with almost all of the countries in the Americas, China, variousmembersoftheEuropeanUnionandAsia‐Pacificeconomies,amongothers.Inaddition,itistheonlycountryintheSAMRegionthatisamemberoftheOECD.16Charts 4.4.1 – Main macroeconomic indicators and GDP evolution

MainMacroeconomicIndicatorsGDP(2015)–US$billion;GDPgrowth2010‐2015‐Annualaverage;PercapitaGDP(2015)‐US$percapita;Population(2015)‐million;Unemploymentrate(2014);Inflation(2015);Internationaltrade(2015)‐%ofGDP;Spendingontourism(2014)–US$billion;Travelandtourism(%ofGDP)WEF2015ReportSource:IMF,WBandWEF.Latestavailabledata

EvolutionofthetotalandpercapitaGDP Billionsofpesos‐GDP‐PercapitaGDPThousandsofpesos

Chile’s economy, like those of many countries in the region, in grounded in theproductionandmarketingofrawmaterials.Itistheworld’slargestcopperproducerandisalsorecognizedgloballyforitsvarietyoffruits,fisheryproductsandwine,amongotherproducts.AccordingtodatapublishedbytheWorldBank,in2015ChileexportedatotalofUS$72billion, representing30.1%of itsGDP. Its total international trade (exports+ imports),foritspart,amountsto60.4%ofitsGDP.Asinthecasesofmanycountriesintheregion,it experienced an economic slowdown attributable for the most part to a setback inmining brought on by the ending of the investment cycle, drop in copper prices andreductioninprivateconsumption.

16TheOrganizationforEconomicCooperationandDevelopment(OECD)isaninternationalcooperationinstitutionmadeupof34stateswhosepurposeistocoordinatetheireconomicandsocialpolicies.Itsmembershipconsistsforthemostpartoftheworld’slargestandmostdevelopedeconomies.

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According to theWorld Bank, total spending on tourism in 2014 was US$ 2.7 billion.Inbound tourists amounted to 3.7 million, 2.7% more than the previous year, whileoutboundtouriststotalled3.2million(up5.7%onthenumberin2013).Charts4.4.2–Exportsandnumberoftourists

Evolutionofexportsofgoodsandservices EvolutioninthenumberoftouristsUS$billions‐Exports(US$)‐Exports(%ofGDP) Millions ‐Inboundtourists‐OutboundtouristsSource: WBAirConnectivityCharts 4.4.3 – Main aviation industry data

OperationalData–AviationIndustry 2015

‐Number of airports; ‐Airlines with directroutes (Sept2016); ‐Numberof internationalroutes*; ‐Number of countries of directdestination;‐Numberofpassengers‐million:‐Domestic million; ‐International million; ‐Numberofflights‐thousand;‐SAMRegion(%ofinternationaltraffic)*IncludesdirectrouteswithorwithoutstopsMainairlineswithflightsinsideandto/from

Chile

MapofChile’s domesticconnectivity

PERU

BOLIVIA

ARGENTINA

BRASIL

PARAGUAY

CHILE

Airline Passengersin2015%share…OthersSource:IATA

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Chilehasatotalof16operatingairports,ofwhich,accordingtoICAO,8areinternational.In2015,ArturoMerinoBenítez(SCL)AirportinthecapitalcityofSantiagoconcentratedthe larger part of the passenger traffic,with a 67% share, followed by Andrés SabellaAirport(ANF)inAntofagasta,accountingfor6%ofthetotaltraffic.Atotalof14.9millionpassengersweretransportedtointernationalanddomesticChileandestinations in 2015, representing growth of 4.7% compared with the previous year.Passenger traffic has risen an average of 8.2% annually over the past 5 years (2010‐2015).Insofar as available seats are concerned, the routes flown to/from and inside Chile in2015hadanavailablecapacityof21.5millionseatsandconsideringthetotalnumberofpassengers transported over direct and indirect Chilean routes (14.8 million), theoccupancyratewasapproximately69%.Charts4.4.4–Evolutioninthenumberofpassengers,flightsandavailableseats

Evolutioninthenumberofpassengers Availableseatsandnumberofflightstoprincipaldestinationsin2015

Millions‐Passengersoninternationalflights Millionsofavailableseats‐Passengersondomesticflights flights……Brazil;…U.S.;…Spain;NewZealandSource:IATA

According to IATArecords,a totalof17commercialairlinesoperatedscheduleddirectand indirect flights from/toand inside the country in2015,with77%of the traffic ondirectroutesoroneswithimmediateconnections.Abreakdownshowsthat46%ofthetraffic corresponded to international flights and 54% to domestic flights. Trafic to theSAMRegionaccountsfor58%oftotalinternationaltrafficto/fromChile.Intermsofdestinationcountries,24countriesweredirectlyconnectedwithChile,withor without stops, by 55 international routes. In the SAM Region, Chile was directlyconnected without stops with 77% of the States: Argentina, Brazil, Bolivia, Colombia,Ecuador,Panama,Paraguay,Peru,UruguayandVenezuela(thelatterceasedtooperatein2016).

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Charts 4.4.5 – Main countries connected with Chile

Maindestinations/originsofdirectand MaincountrieswithdirectroutestoChileindirectroutestoChileThousandsofpassengers:Brazil;…U.S;….Spain;…Dom.Rep. Thousandsofpassengers:…Brazil;…U.S;….SpainSource:IATA

Outofitstotal(directandindirect)internationaltraffic,Brazil,ArgentinaandtheUnitedStatesarethecountrieswiththegreatestconnectivitywithChileandaccountedforover47%of total passenger traffic in 2015 (17.8%, 16.7% and 12.7%of the total traffic of2015, respectively). Considering only the direct routes, Argentina, Brazil and Perurepresentedthemostimportantandtogetherconcentratedover64%ofthetotaltrafficondirectroutesin2015(28.7%,20.6%and14.9%,respectively).Themain airlines operating in Chile are: LATAMAirlinesGroup17with a share of over60%ofthetotalpassengerstransportedin2015,followedbySkyAirlinewith19.1%andCOPAinthirdplacewith2.7%.Figure 4.4.1 – Map of Chilean passenger air transport connectivity with the world

17ThisdoesnotincludealloftheairlinesassociatedwiththeLATAMGroup.ThedatabasesuppliedbyIATAincorporatesChileandPeruunderthisname(LATAMAirlinesGroup),whiletherestoftheGroupcompaniesarerecordedindividually.

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CANADA

R. DOMINICANA

ALEMANIA

ITALIA

NUEVA ZELANDA

AUSTRALIA

FALKLAND ISLANDS

MEXICO

EEUU

HOLANDA

POLINESIA FRANCESA BRASIL

URUGUAYARGENTINA

VENEZUELA

PARAGUAY

COSTA RICA PANAMA

CHILE

COLOMBIAECUADOR

PERU

FRANCIA

ESPAÑA

BOLIVIA

Source:IATA.Prepared:In‐house

TheabovemapshowsallofChile’sdirectrouteswiththeworld. Inordertobeabletooperatethoseroutes,airlinesrequireoperatinglicencesbetweenthepointsoforiginanddestinationfordirectflightswithandwithoutstops.Directnon‐stoproutesareshowninblue and direct routes with stops, in red. Annex A lists all direct non‐stop routes byairport.In the case of air cargo, IATA figures reveal that a total of 137 thousand tonnes of aircargoweretransported.Itshouldbestressedthatthosefiguresconsideronlythetonnesreported by airlines belonging to the CASS (Cargo Accounts Settlement Systems)programme.ItsmostimportanttradingpartnerviaairistheUnitedStateswithan88%share.Charts4.4.6–Mainaircargofigures

EvolutionofaircargooriginatinginChile Mainaircargodestinationsin2015Tonnes U.S.88%;Spain3%;Others9%Source:IATA

CompetitivenessoftheIndustryAccordingtotheWorldEconomicForumcompetitivenessranking,Chileoccupiesthe51stpositionoutofatotalof141countriesanalyzedintermsofthecompetitivenessoftheir

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travelandtourismindustries in2015.A lookatsomeindividual indicatorsreveals thatChile ranks above average in the global sampling in terms of the quality of its airtransport infrastructure and domestic transportation system and openness inrequirements for visas and bilateral agreements. Even so, it still has room forimprovement in prioritization by the government of the industry and marketing oftourism.

Table4.4.1.–Competitivenessofthetravelandtourismindustryin2015

ScorerangeScoreRankingTravelandtourismcompetitivenessindexSpecificindicators(scorerange)PrioritizationbythegovernmentoftheindustryEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetworkVisarequirementsOpennessofbilateralserviceagreements(ASAs)Airfaretickettaxesandairportcharges

Source:WEF

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SWOTAnalysis–Chile’sConnectivity

Strengths

Leadership of LAN, the Chilean airline, in developing aviation in the region via alliances andmergers throughwhich LATAMwasformed. This has made it possible to create new national airlines in several South American countries, with the result thatconnectivityhasbeenexpanded.

Privilegedpositioninitsliberalizationpolicy,makingittheonlycountryintheregionwith“openskies”forallcommercialaviation. Centresoftouristattractionthatcontributetothedevelopmentofgreaterconnectivity. Socialandeconomicstabilityandafreemarketpromotingthecreationofnewairlines. Alliances,partnershipsand/code‐sharingagreementsbetweenChilean,SAMRegionandworldairlines. Operationofnationalcargoairlines. Operationof“lowcost”airlines. Efficientdevelopmentofsafetytechnologiesandairnavigationservices. Schoolfortheprofessionaltrainingofpilots. Implementationoftheelectronicairwaybillandofprocessesthateliminateprinteddocumentswith“e‐Freight”. InternationalpassengerandcargoairfareticketsarenotsubjecttothepaymentofVAT. TheSantiagoairport isequippedtoreceive long‐hauland large‐capacityaircraft; it isnowbeingoperatedunderanewconcession,whichmustimplementimprovementsinthemodelinordertoreachthecapacityprojectedat2020.

FreeWiFisinceApril2016intheSantiagoairport;thisistobeextendedtotherestoftheairportsinthenearfuture. ProactiveStateroleinthedevelopmentofairportinfrastructure. Trafficgrowthprojectionat2050,andnewAMBconcessionhandedovertoADP,ensuringtheconstructionofasecondterminalinSantiago;workisexpectedtostartin2016,whichwillmakeitpossibletooperatewithasufficientofferingupuntil2025.

TheWorldTradeOrganization (WTO)grantedChileanAirLiberalization Indexof16.08 (2013)ona scaleof0‐50 (thehigher theindex,thegreatertheliberalization),whichisthehighestintheSAMRegion.

Opportunities

Growthoftheglobaldemandfortourism. EconomicgrowthofStateslikeChinaandIndiaandoftheAsia‐PacificRegion. Tradeglobalization. Freetradeagreements(FTA),APEC,PacificAlliance,TransPacificPartnership(TPP). Industrytechnologytofacilitateairportcheck‐in,securityandembarkationservicesandmakethemmoreefficient.DRAFT

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IntegrationandagreementswithoneormoreoftheRegion’sStatestoattracttourismfromdistantcountries.

Weaknesses

Highairportcostsandcharges.50%increaseattheSantiagoairport. Someoftheairportcheck‐in,security,immigrationandembarkationprocesseshavenotbeenfullyautomated. Locationofthemainairportsfarfromthecities,withpoorroadconnectionsandpublictransport.

Ministerialofficialswithoutclearly‐establishedleadershiplinesparticipateinstrategicandoperationalmanagementdecisions.

VATchargedondomesticairfaretickets,airportfacilitationcharges.

Threats

Unforeseeableterroristactshaveanegativeimpactonthesecurityoftheindustry. Globaleconomiccrisisorrecession. Communicablediseases. Fluctuationsinoilpricesraiseindustrycosts. Climatechangeand/ornaturaldisasters.

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4.5. ColombiaGeneralDescriptionColombiaisoneoftheSAMRegion’smostprosperousandimportanteconomies,rankingsecondinpopulation(48millioninhabitants)andthirdintotalGDP(US$293billion).Itsper capita GDP (US$ 6.0 thousand) makes it an “upper middle‐income” economy,accordingtotheWorldBankclassification.Oneoftheworld’smostbiodiversecountries,afterBrazil,itsnaturalandculturalwealthpositionitasamajortouristdestinationintheregion, with 8 recognized UNESCO World Heritage sites (2 natural and 6 cultural).Furthermore,itsgeographicpositionwithintheregionmakesitapointofaccesstoothercountries.Charts 4.5.1 – Main macroeconomic indicators and GDP evolution

MainMacroeconomicIndicators

GDP (2015) US$ billion; GDP Growth 2010‐2015 Annualaverage; PercapitaGDP(2015)US$percapita; Population(2015) Million; Unemployment rate (2014); Inflation(2015); InternationalTrade(201?) %ofGDP; Spendingontourism(2014) US$billion; Travelandtourism(%ofGDP)WEF2015ReportSource: IMF, WB and WEF. Latest available data

EvolutionoftotalandpercapitaGDP Billionsofpesos ‐GDP‐PercapitaGDPMillionsofpesos Source:IMF

Its economy, like inmost countries in the SAMRegion, dependsmainly on agriculture,stockbreedingandmining.TheglobaleconomicslowdownanddropinoilpricesreducedColombia’s growth rate from over 4% during the period of 2011‐2014 to 3.1% en el2015. The service, agricultural andmanufacturing sectors, however, started to recovertowardstheendof2015,movingonceagaintowardgrowth.According to World Bank data, in 2015, Colombia exported a total of US$ 43 billion,equivalent to 14.7% of its GDP,while its total international trade (exports + imports)represented39%of itsGDP. In thecaseof tourism, total spending for2014wasUS$5billion.Inboundtouristsnumbered2.6million,up12.1%onthoseofthepreviousyear,whileoutboundtouriststotalled3.9million(8.5%morethanin2013). Charts 4.5.2 – Exports and number of tourists

Evolution of exports of goods and services Evolution in number of tourists

US$ billions -Exports (US$) -Exports (% of GDP) Millions -Inbound tourists -Outbound tourists

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Source:WB

AirConnectivityCharts 4.5.3 – Main aviation industry data

Operationaldata–AviationIndustryin2015

*IncludesdirectrouteswithorwithoutstopsNumber of airports; Airlines with direct routes (Sept2016); Number of international routes; Number ofcountriesofdirectdestination;Numberofpassengers28.8million: Domestic 19.1million, International 9.8 million;Number of flights 340 thousand; SAM Region (% ofinternationaltraffic)

Mainairlineswithflightsinsideandto/from

ColombiaAirlinePassengers201?%share

Map ofColombiandomesticconnectivity

PERU

PANAMA

ECUADOR

BRASIL

COLOMBIA

VENEZUELA

Others

Source:IATA Colombiahasatotalof54operatingairports,ofwhich11areinternational,accordingtoICAO. El Dorado International Airport (BOG) and Aeroparque Internacional JoséMaríaCórdova (MDE), located in the capital city of Bogotá and in Antioquia, respectively,accountforthegreaterpartofthecountry’spassengertraffic,whichamountedin2015to48%and13%,respectively.A total of 28.8million passengerswere transported over Colombian international anddomestic routes in 2015, or 8.1% more than the previous year. The number of

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passengershasrisenanaverageof9.8%perannumoverthepast5years(2010‐2015).Theavailableseatingcapacityin2015ontheroutesflownto/fromandinsideColombiawas 43.5 million seats. Considering the total number of passengers on the country’sdirectandindirectroutes(28.8million),theoccupancyratewasapproximately66%.Charts4.5.4–Evolutionofpassengers,flightsandavailableseats

Source:IATAEvolutioninthenumberofpassengers Available seats and number of flights to

principaldestinationsin2015Millions‐Passengersoninternationalflights;‐ Millionsofavailableseatsflights….flights…U.S;…Spain;…BrazilPassengersondomesticflights

According to IATArecords,a totalof28commercialairlinesoperatedscheduleddirectand indirect flights to/from and inside the country in 2015, with 79% of the trafficconsistingofdirect flightsorflightswith immediateconnections. Afurtherbreakdownshows that34%were international flightsand theremaining66%,domestic.Traffic tothe SAMRegion accounted for 34%of the total international traffic to/fromColombia.Insofar as destination countries are concerned, 26 countries were directly connectedwithColombia,withorwithout stops, via103 international routes. In theSAMRegion,Colombiawasdirectlyconnectedwithoutstopsto62%oftheregion’sStates:Argentina,Brazil,Bolivia,Chile,Ecuador,Panama,PeruandVenezuela.Charts 4.5.5 – Main countries connected with Colombia

Main destinations/origins of direct and indirect routes to Main countries with direct routes to Colombia Colombia


U.S.; …Spain; … Brazil U.S.; …Spain; …Brazil

Source: IATA

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Outofitstotalinternationalairtraffic(directandindirect),theUnitedStates,MexicoandPanamaarethecountrieswiththegreatestconnectivitywithColombiaandaccountedin2015 forover52%of the totalpassenger traffic (33.1%,9.7%and9.3%, respectively).Considering direct routes only, the United States, Panama and Mexico represent themajorroutesandtogetherconcentratedover58%ofthetotaltrafficondirectroutesin2015(34.3%,15.3%and9.2%,respectively).ThemainairlinesoperatinginColombiain2015wereAviancawithoverone‐halfofthetotalpassengers transported(54.6%), followedbyLATAMAirlinesGroup18with13.4%andCOPAinthirdplacewith8.3%.Figure4.5.1.MapofColombianpassengerairtransportconnectivitywiththeworld

18DoesnotincludealloftheairlinesassociatedwiththeLATAMGroup.IATA’sdatabaseincorporatesChileandPeruunderthisheading(LATAMAirlinesGroup),whiletherestoftheGroupcompaniesareregisteredindividually.

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CANADAREINO UNIDO ALEMANIA

MEXICO

R. DOMINICANACUBA

CHILE

EEUU

PERU

BARBADOS

ECUADOR

BRASIL

ARGENTINA

COSTA RICA

HONDURASEL SALVADOR

GUATEMALA

BOLIVIA

ESPAÑA

PANAMA

HOLANDA

FRANCIA

PORTUGAL

ARUBA

VENEZUELACURACAO

COLOMBIA


TheabovemapshowsallofColombia’sdirectroutestotheworld.Inordertobeabletooperate those routes, airlines require licenses to fly between the points of origin anddestinationfordirectflightswithorwithoutstops.Directnon‐stoproutesareshowninblueanddirectrouteswithstops,inred.AnnexAlistsallofthedirectnon‐stoproutesbyairport.In thecaseofair cargl, according to IATA figures, a totalof224 thousand tonnesweretransported. ItshouldbestressedthatthesefiguresconsideronlythetonnesreportedbyairlinesbelongingtotheCASS(CargoAccountsSettlementSystems)programme. Itsmost important trading partner was the United States, with a 72% share, followed insecondplacebytheNetherlandswith9%andPeruinthirdwith3%.

Charts 4.5.6 – Main air cargo figures Evolution of air cargo originating in Colombia Main air cargo destinations in 2015 Tonnes U.S. 72%; Netherlands 9%; …United Kingdom 2%; Others

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Source:IATA

CompetitivenessoftheIndustryIn the World Economic Forum competitiveness ranking, Colombia occupied the 68thpositionoutofatotalof141countriesanalyzedintermsofthecompetitivenessoftheirtravelandtourismindustriesin2015.AlookatsomeindividualindicatorsrevealsthatColombia is relativelywell‐positioned in its openness to the requirement for visas andbilateralagreements,butshowsconsiderableroomforfurtherworkonthequalityofitsair transport infrastructure and domestic transportation system, as well as on thereductionofitsairportchargesincomparisonwiththerestoftheworld’scountries.

Table4.5.1–Competitivenessofthetravelandtourismindustryin2015


Source:WEF

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SWOTAnalysis–Colombia’sConnectivity

Strengths

GeographiclocationonthePacificandCaribbeancoastinthenorthernpartoftheregion. Strongdomesticaviationmarket. Mostnationalairlinesreportcontinuousgrowthofpassengerandcargotrafficdespitethecrisisanddollardevaluation. Centresoftouristattractionarebeingconsolidatedwiththesigningofthedomesticpeaceagreement. Economicinvestmentcentres. Biodiversityandecotourismdevelopment. TheairportinfrastructureandtheneedtocoverthedemandwithefficientinstallationsareapriorityforColombiangovernmentofficials,whohavepromoted thepreparationandupdatingofairportmasterplansandan investmentplan for remodellingandmodernization,withnewprojectsandmaintenancework.

GovernmentinvestmentinthemodernizationofBogotaairspace. Increaseindomesticairlinesthathavecontributedtogreaterdirectconnectivityonunservedroutes. Directconnectivityforinternationalflightsatdifferentpointsinthecountry. Bogota’sElDoradoairportenjoystheheaviestcargomovementinSouthAmericaandthelargestnumberofcargooperations(45),80%oftheshipmentsconsistingoffreshflowers.

“Low‐cost” airlineparticipationhasproduced a largerofferingofnational and international routes and frequencies and growthof themarketbase.

DevelopmentoftheBogotaairportasaSAMRegionalhub. UseofAPI(AdvancedPassengerInformation)technology. Theexistenceofacertifiedpilotschoolfacilitatesthetrainingofnewgenerationsofprofessionalsfromtheregion.

Opportunities

Growthoftheglobaldemandfortourism. EconomicgrowthofStateslikeChinaandIndiaandoftheAsia‐PacificRegion. Tradeglobalization. Differentagreements(FTAs)andthePacificAlliance. Decentralizeddevelopmentofconnectivity. Industry technology that facilitates and simplifies passenger check‐in and embarkation, with rapid immigration and security controlprocesses.

PartnershipsandagreementswithSAMRegionairlines(codesharing)DRAFT

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Customsfacilitationforpassengersandcargo. AgreementsandintegrationwithoneormoreoftheRegion’sStatestoattracttourismfromdistantcountries. CargoAccountsSettlementSystem(CASS)efficiencies.

Weaknesses

AirfareticketssubjecttothepaymentofVAT,TourismTaxandAirportCharges. Regulator standards and regulations that are incompatible with the needs of the industry, thereby affecting sector and connectivitydevelopment.

Despitetheinvestmentinandorientationtowardinfrastructuredevelopment,acoordinatedgeneralvisionislackingforaviationanditslong‐termdevelopment.

Taxburdenthatfailstoboostsectorgrowth.(OversighttaxthataffectsallStatetransport). Highcostsofaeronauticalinfrastructure. Slowairportcustomsandimmigrationprocesses. Bureaucraticcustomsformalities. Bilateralandmultilateralairservicesagreements(ASAs)continuetooperatewithinanenvironmentofregulatoryprotectionismandhavenotbeenupdatedtoconformtonewmarketconditionsandthecharacteristicsofthecurrentglobalizationprocess.

TheWorldTradeOrganization(WTO)grantedColombiaanAirLiberalizationIndexof8‐55(2013)onascaleof0‐50(thehighertheindex,thegreatertheliberalization).

Threats

Unforeseeableterroristactshaveanegativeimpactonthesecurityoftheindustry. Globaleconomiccrisisorrecession. Communicablediseases. Fluctuationsinoilpricesraiseindustrycosts. Citizeninsecuritythreatenspassengerassetsandsecurityandhasanegativeimpactontraffictotheterritory. Drugtrafficking. Climatechangeand/ornaturaldisasters. DRAFT

4.6. EcuadorGeneralDescriptionEcuadorisoneofthesmallestterritoriesintheSAMRegionarea‐wise,butisseventhintermsof its totalpopulation (16million inhabitants)andseventh,aswell, in totalGDP(US$ 99 billion). Its per capita GDP (US$ 6.1 thousand) makes it an “upper middle‐income”economyinaccordancewiththeWorldBankclassification. Itpossessesatotalof5recognizedUNESCOWorldHeritagesites(2naturaland3cultural).Charts 4.6.1 – Main macroeconomic indicators and GDP evolution


GDP (2015) US$ billion; GDP Growth 2010-2015 Annualaverage; Per capita GDP (2015) US$ per capita; Population (2015) Million; Unemployment rate (2014); Inflation (2015); International trade (2015) % of GDP; Spending on tourism (2014) US$ billion; Spending on tourism (% of GDP)

Evolution of total and per capita GDP Source: IMF, WB and WEF. Latest available data US$ billions -GDP -Per capita GDP US$

Source:IMF

AgricultureisveryimportanttotheEcuadoreaneconomy.Thecountryleadstheworldin the production and export of bananas and its output of shrimps, sugarcane, rice,cotton,corn,heartsofpalm,coffeeandflowersisalsosignificant.Itfurtherpossessesasizeablewealthofeucalyptus,pineandcedar.AccordingtodatapublishedbytheWorldBank,EcuadorexportedatotalofUS$21billionin 2015, amounting to 21.1% of its GDP. Furthermore, its level of international trade(exports+imports)isequivalentto45.1%ofitsGDP.Intermsoftourism,totalspendingfor2014wasUS$1billion.Inboundtouristsnumbered1.6million,forgrowthof14.1%over theprevious year,while outbound tourists amounted to 1.3million (12.3%morethanin2013).


Evolution of exports of goods and services Evolution in number of tourists

US$ billions -Exports (US$) -Exports (% of GDP) Millions -Inbound tourists -Outbound tourists

Source: WB

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AirConnectivity

Charts 4.6.3 – Main aviation industry data

OperationalData–AviationIndustry 2015

*IncludesdirectrouteswithorwithoutstopsNumber of airports; Airlines with direct routes (Sept2016); Number of direct international routes; Number ofcountries ofdirectdestination; Numberof passengers7.4million: Domestic 3.5 million, International 3.8 million;Number of flights 74.7 thousand; SAM Region (% ofinternationaltraffic)Mainairlineswithdirectflightsinsideand

to/fromEcuadorAirlinePassengersin201?%share…Others

MapofEcuadoreandomesticconnectivity

Source:IATAEcuador has a total of 16 operating national airports, of which 4 are international,according to ICAO. Mariscal Sucre International Airport (UIO) and José Joaquín deOlmedoInternationalAirport(GYE),locatedinthecapitalcityofQuitoandinGuayaquil,respectively, concentrated thegreaterpartof thepassenger traffic,withsharesof49%and37%,respectively,in2015.A total of 7.4 million passengers were transported to international and domesticdestinationsin2015,slightly‐1.2%lessthanthepreviousyear,butoverthepast5years(2010‐2015) the number of passengers rose an average of 2.5% a year. In terms of

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available seating, in2015, theavailable capacityon routes to/fromand insideEcuadoramountedto9.8millionseats.Consideringthetotalnumberofpassengersondirectandindirectflights(7.4million),theoccupancyratewasofapproximately75%.Charts 4.6.4 – Evolution in the number of passengers, flights and available seats

EvolutioninthenumberofpassengersAvailableseatsandnumberofflightstoprincipaldestinationsin2015

Millions‐Passengersoninternationalflights Millionsofavailableseats…flightsU.S;…Spain;Netherlands.‐Passengersondomesticflights

Source:IATA

AccordingtoIATArecords,in2015,atotalof19commercialairlinesoperatedscheduleddirect and indirect flights from/to and inside the country, with 69% of the trafficconsisting of direct flights or ones with immediate connections. A breakdown of thetrafficalsoshowsthat52%consistedofinternationalflightsand48%ofdomesticflights.The SAM Region accounts for 35% of the total traffic to/from Ecuador. In terms ofdestination countries, 16 countries were connected directly, with or without stops, toEcuadorvia47internationalroutes.IntheSAMRegion,Ecuadorwasconnecteddirectlywithout stopswith 54% of its States: Argentina, Brazil, Chile, Colombia, Panama, PeruandVenezuela.Charts 4.6.5 – Main countries connected with Ecuador Main destinations/origins of direct and Main countries with direct routes to Ecuador indirect routes to Ecuador Thousands of passengers Thousands of passengers U.S;….Spain;…Brazil U.S;….Spain;…Netherlands Source: IATA DRAFT

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Outof itstotal internationalairtraffic(directandindirect),theUnitedStates,Colombiaand Spain have the greatest connectivity with Ecuador andwere responsible for over56%ofthetotalpassengerairtrafficin2015(37.1%,11.0%and8.2%,respectively).Inthecaseofdirectroutesonly,theUnitedStates,ColombiaandPeruaccountforthemostimportant of these,which in 2015 added up to over 66% of the total traffic on directroutes(33.9%,18.5%and13.7%,respectively).ThemajorairlineswithdirectandindirectflightsinsideandoutsideEcuadorareTame,with a share of almost one‐third of the total passengers transported in 2015 (31.8%),followedinsecondplacebyAviancawith19.5%,withLATAMAirlinesEcuadorcominginthirdwith15.6%.

Figure4.6.1–MapofEcuador’spassengerairtransportconnectivitywiththeworld

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M EXICOCUBA

ARUBA

CHILE

EEUU

HOLANDA

ESPAÑA

BRASIL

ARGENTINA

EL SALVADORCURACAO

PERU

PANAM AVENEZUELA

COLOM BIAECUADOR


ThemapaboveshowsallofEcuador’sdirectrouteswiththeworld.Inordertobeabletooperatethoseroutes,airlinesrequireoperatinglicencesbetweenthepointsoforiginanddestinationfordirectflightswithorwithoutstops.Directnon‐stoproutesareshowninblueanddirectrouteswithstops,inred.AnnexAlistsallofthedirectnon‐stoproutesbyairport.In the case of air cargo, according to IATA data, a total of 120 thousand tonnes of aircargo weretransported(3.0%withrespect tothepreviousyear). ItshouldbepointedoutthatthosefiguresconsideronlythetonnesreportedbyairlinesbelongingtotheCASS(CargoAccountsSettlementSystems)programme.Itsmostimportanttradingpartnerintermsofair transport is theUnitedStates,witha90%shareof that trade, followedbySpainwith5%.


Evolution of air cargo originating in Ecuador Main air cargo destinations in 2015

Tonnes U.S. 90%; Spain 5%; Others 5%

Source:IATA

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DRAFT

SWOTAnalysis–Ecuador’sConnectivity

Strengths

GeographiclocationatthecentreofthenorthernPacificcoast. Socialandeconomicstability. Centresoftouristattraction. Economicinvestmentcentres. Biodiversityforthedevelopmentofecotourism. Operationofbothtraditionaland“low‐cost”airlines Infrastructureforaircargocarriersbasedonpotentialexportsofperishableproducts. SharedcodeagreementsbetweennationalairlinesandtheRegion’sairlines Agreementandtreatiesforairtransportdevelopment(Canada). ImplementationofAPItechnologyforimmigration,customsandStateinstitutions

Opportunities

Growthintheglobaldemandfortourism. EconomicgrowthofStateslikeChinaandIndiaandoftheAsia‐PacificRegion. Tradeglobalization. Governmentpolicyallowingforgreateropennesstoaviation. Industry technology facilitating and simplifying passenger check‐in and embarkation, with rapid immigration and security controlprocesses.

PartnershipsandagreementswiththeRegion’sairlines(codesharing) Simplificationofcustomsregulations. RevisionofASAs(bilateralandmultilateral). TourismagreementsandintegrationwithoneormoreoftheRegion’sStatestoattracttourismfromdistantcountries.

Weaknesses

Increaseinthetourismcharge. Highpassengertaxesandcharges:AirfareticketssubjecttothepaymentofVAT,airporttax,ecologicaltax,infrastructuretax,andsecuritytax.

12%VATonfuelfordomesticflights,withaircraftfuelsubjecttoa5%DGACtax. Reactive, rather thanproactive,management in infrastructuredevelopment; thenewQuito terminalhasa lowcapacity in termsof theDRAFT

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potentialdemand,andaccessroadsinpoorcondition. Slowairportcheck‐in,security,customs,immigrationandembarkationprocesses. Bilateralandmultilateralairservicesagreements(ASA)continuetooperatewithinanenvironmentofregulatoryprotectionismandhavenotbeenbroughtintolinewiththenewmarketconditionsandcharacteristicsofthecurrentglobalizationprocess.

TheWorldTradeOrganization(WTO)attributedanAirLiberalizationIndexof10.06(2013)onascaleof0‐50(thehighertheindex,thegreatertheliberalization)toEcuador.

Threats

Unforeseeableterroristactshaveanegativeimpactonthesecurityoftheindustry. Globaleconomiccrisisorrecession. Communicablediseases. Fluctuationsinoilpricesraiseindustrycosts. Climatechangeand/ornaturaldisasters.

DRAFT

4.7. GuyanaGeneralDescriptionGuyanaisoneofthesmallestcountriesintheSAMRegionwithapopulationborderingon767 thousand inhabitants and a GDP in 2015 of approximately US$ 3.2 billion. Its percapita GDP (US$4.1 thousand) places it in theWorld Bank category of “uppermiddle‐income”economy.Itsterritoryisveryrichinnaturalresources,over80%consistingoftropicaljungle.AccordingtotheWorldBank,approximately90%ofGuyana’sforestsareuntouched, with one of the world’s lowest deforestation rates, making it a greatattractionforecotourism.Charts 4.7.1 – Main macroeconomic indicators and GDP evolution


GDP (2015) US$ billion; GDP Growth 2010‐2015 Annualaverage; PercapitaGDP(2015)US$percapita; Population(2015) thousand; Unemployment rate (2014); Inflation(2015); International trade(201?) %ofGDP; Spendingontourism(2014)US$million;Travelandtourism(%ofGDP)WEF2015ReportSource: IMF, WB and WEF. Latest available data

EvolutionoftotalandpercapitaGDP$BillionsofGYD‐GDP‐PercapitaGDP$thousandsofGYDSource: IMFAgriculture is Guyana’s most important economic activity and its main agriculturalexportsaresugar,rice,cacaoandcoffee.Bauxiteandgoldminingareanotherimportantactivity. Thecountryalsopossessesasizeablesupplyoftimbertreesandexportslargequantitiesoffreshwatershrimp.AccordingtotheWorldBank,thecountry’sagricultural,fishery,forestryandminingsectorsaccountedfor28%ofitstotalGDPin2015.

In2015GuyanaexportedatotalofUS$1.4billion(46%ofitstotalGDP),ofwhichbauxite,sugar,rice,goldandlumberwereresponsiblefor83%.Itsinternationaltrade(exports+imports) represented121%of itsGDP, reflecting a significant level of imports. At thesame time, spending on tourism in 2014 amounted to US$ 77 million, with inboundtouristsreachingafigureof206thousand.


Evolution of exports of goods and services Evolution in the number of inbound tourists

US$ billions -Exports (US$) -Exports (% of GDP) Thousands

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Source: WB. The World Bank does not record information about outbound tourists. AirConnectivity Charts 4.7.3 – Main aviation industry data

Operationaldata–AviationIndustry in2015

Number of international airports; Airlines with directroutes; Number of international routes*; Number ofcountries of direct destination; Number of internationalpassengers493thousand;Numberofflights6.8thousand;SAMRegion(%ofinternationaltraffic)*IncludesdirectrouteswithorwithoutstopsSource: IATA

Main airlineswithflightsinsideandto/fromGuyana

AirlinePassengersin201?%share…Others

Guyanahasatotalof2operatingairportsforinternationalflights.Ofthese,CheddiJaganInternational Airport (GEO) handled most of the international air traffic (91%) whileOgleAirport (OGL)was responsible for the remaining9% in 2015. It should be addedthattodayOgleAirportisinchargeofconcentratingthedomestictraffic.

In 2015, a total of 493 thousand passengers were transported to internationaldestinations, up6.9%over theprevious year. Thenumberof passengershas risen anaverage of 2.3% per annum over the past 5 years (2010‐2015). Insofar as availableseatingisconcerned, in2015,thedirectandindirectroutestoGuyanahadanavailablecapacityof891thousandseats.Consideringthetotalnumberofpassengerstransportedin2015(493thousand),theoccupancyratewasabout55%.

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Charts 4.7.4 – Evolution of passengers, flights and available seats

Evolutioninthenumberofinternational Availableseatsandnumberofflightstopassengers themaindestinationsin2015Thousands ThousandsofavailableseatsFlights….flights ...U.S….Source: IATAAccordingtoIATArecords,in2015,atotalof9commercialairlinesoperatedscheduleddirect and indirect routes from/to and inside the country, with 72% of the trafficcorresponding to direct routes or thosewith immediate connections. Trafficwith theSAM Region accounted for 8% of international traffic to/from Guyana. In terms ofcountriesofdestination,Guyanawasdirectlyconnected,withorwithoutstops,with16countriesover19 international routes. In theSAMRegion,Guyanahaddirectnon‐stopconnectionswith23%oftheStates:Panama,SurinameandVenezuela(thelatterceasedoperatingin2016).Charts 4.7.5 – Main countries connected with Guyana

Maindestinations/originsofdirect MaincountrieswithdirectroutestoGuyanaandindirectroutestoGuyanaThousandsofpassengers Thousandsofpassengers

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U.S.;Trinidad&Tobago;…UnitedKingdom;…Dom.Rep U.S.;Trinidad&Tobago….Source: IATAOutof its total international (directand indirect)air traffic,GuyanaenjoysthegreatestconnectivitywithTrinidadandTobago,Canada,and Jamaica,whichaccounted forover56% of its passenger air traffic in 2015 (25.0%, 15.9% and 15.4% of the total,respectively).Consideringthedirectroutesonly,TrinidadandTobagocontinuestolead,followed by Jamaica and then Canada,which togetherwere responsible formore than73% of the total traffic over direct routes in 2015 (34.5%, 19.8% and 18.9%,respectively).The main airlines with direct and indirect flights inside and outside Guyana areCaribbean Airlines, which in 2015 accounted for over 60% of the total passengerstransported(63.1%),followedinsecondplacebyFlyJamaicaAirwayswith12.6%andinthirdbyLIATwith8.4%.

Figure4.7.1–MapofGuyana’spassengerairtransportconnectivitywiththeworld

CANADA

EEUU

SURINAMEGUYANA

SANTA LUCIASAINT KITTS Y NEVIS

JAMAICADOMINICA

ISLAS VIRGENESANTIGUA Y BARBUDASAINT MARTEN

BARBADOSPANAMA

ARUBA

TRINIDAD Y TOBAGOVENEZUELACURACAO


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ThemapaboveshowsallofGuyana’sdirectrouteswiththeworld.Inordertobeabletooperate those routes, airlines require licenses to fly between the points of origin anddestinationfordirectflightswithorwithoutstops.Thedirectnon‐stoproutesareshowninblueanddirectrouteswithstops,inred.AnnexAlistsallofthecountry’sdirectnon‐stoproutesbyairport.

AirCargoAccordingtotheWorldBank,over90%of itscommercialcargoistransportedto/fromGuyanabyseaandoverland. Inasmuchasaircargoaccountsforverylittle,norelevantfiguresareavailable.Furthermore,thecountryisnotaparticipantinIATA’sCASS(CargoAccountsSettlementSystems)programme.CompetitivenessoftheIndustryIn the World Economic Forum competitiveness ranking, Guyana occupied the 104thpositionintermsofthecompetitivenessofitstravelandtourismindustrywithinthe141countries analyzed in 2015. A look at some of the individual indicators reveals thatGuyanaisrelativelywellpositionedintermsoftheopennessofitsvisarequirementsandbilateralserviceagreements,qualityofitsdomestictransportinfrastructure,andairfaretickettaxesandairportcharges.Evenso,itstillhasroomtoimprovethequalityofitsairtransport and tourist service infrastructure and to enhance the government’sprioritizationoftheindustryandthemarketingofitstouristattractions.



Source:WEF

DRAFT

SWOTAnalysis–Guyana’sConnectivity

Strengths

GeographiclocationtheStatehopestotakeadvantageoftointerconnecttheregionwithcountriesintherestoftheworld. Centresoftouristattractionthatcontributetoeconomicgrowth,jobcreationandthedevelopmentofconnectivity. Theregion’ssignificantbiodiversityisanimportantassetforthedevelopmentofecotourism. Favourableenvironmentforinvestments. FirstnationintheregiontoratifytheTradeFacilitationAgreement(TFA),qualifyingittobethe53rdmemberoftheWTO. ItisthepolicyoftheStatetosupportthedevelopmentofaviation,increasethecountry’sconnectivityandimprovethesituationofitsflightsto/fromBrazil,Suriname,VenezuelaandGuyana.

ParticipationinUnasurandCelachasalteredtheState’sinterestsandinitiativesandreinforcedtheneedtobecomepartoftheeconomiesoftheSAMRegion.

InbroadeningthecapacityoftheCivilAviationAuthority,plansforairportinfrastructurewillbeimplemented,therebyreinforcingtheprogrammeforupgradingtheairportsinthecountry’sinterior.

Opportunities

Growthoftheglobaldemandfortourism. EconomicgrowthofStateslikeChinaandIndiaandoftheAsia‐PacificRegion. Tradeglobalization. API(AdvancedPassengerInformation)technologyforimmigrationprocessesusingsecure,encryptedelectronictransmissionswithagreatercapacityforhousingpassengerdata.

Industry technology that facilitatesandsimplifiespassengercheck‐inandembarkation,with rapid immigrationandsecuritycontrolprocesses.

PartnershipsandagreementswithStatesintheSAMRegionforthedevelopmentoftrafficlinks. PartnershipsandagreementsbetweenairlinesintheSAMRegion. Agreementsandintegrationwithoneormoreoftheregion’sStatesfortheattractionoftourismfromdistantcountries.

Weaknesses

Reactive,morethanproactive,managementinthedevelopmentofairportinfrastructureandmasterplans. Airportcheck‐in,security,customs,immigrationandembarkationrequirenewtechnology. SAMRegionrequirementfortouristvisaslimitsthedevelopmentoftourism(exceptinthecasesofBrazilandArgentina) ApplicationofVATtoairfaretickets,internationalairportcharge,anddomesticandinternationalfacilitationtax.DRAFT

97

Bilateralandmultilateralairservicesagreements(ASAs)continuetooperatewithinanenvironmentofregulatoryprotectionismandhavenotbeenbroughtintolinewiththenewmarketconditionsandthecharacteristicsofthecurrentglobalizationprocess.

Mostexportsareshippedbysea.

Threats

Unforeseeableterroristactshaveanegativeimpactonthesecurityoftheindustry. Globaleconomiccrisisorrecession. Communicablediseases. Fluctuationsinoilpricesraiseindustrycosts. Climatechangeandnaturaldisasters.

DRAFT

4.8. FrenchGuianaGeneralDescriptionTheterritoryofFrenchGuianaisaregionandpoliticaldepartmentofFrance.Althoughgeographicallysituated inSouthAmerica, itbelongstotheEuropeanUnionasanultra‐peripheralregion.Asmallterritorywithapopulationestimatedat276thousandpeople,accordingtotheUnitedNations, ithasatotalGDPof$5.3billion,oneofthesmallestinthe SAM Region, but its per capita GDP, at US$ 21.5 thousand, is one of the highest,placing it close to theWorld Bank’s classified “high‐income” economies19. It has beenestimatedthatover98%ofitstotalareaconsistsofforestland,givingitagreatpotentialforecotourismintheregion.Charts 4.8.1 – Main macroeconomic indicators and GDP evolution


GDP US$ billion; Per capita GDP US$; Population 276 thousand; Unemployment rate -estimated; Inbound tourists 185 thousandSource: INSEE, UNdata Note: Access to individualized and official information about French Guiana is limited, given its status of French territory and political department. The World Bank database has no individual data for French Guiana.

EvolutionoftotalandpercapitaGDPUS$billions‐GDP‐PercapitaGDPUS$thousands

Itseconomydependsprimarilyonfishing,miningandforestry.Italsohasaspacestation(Kourou Space Centre) that contributes almost one‐quarter of the nation’s GDP andemploysover1,500people.

AirconnectivityCharts 4.8.2 – Main aviation industry data Operationaldata–AviationIndustryin 2015

Numberofinternationalairports;Airlineswithdirectroutes*;Numberofinternationalroutes;Numberof

Main airlineswithflightsinsideandto/fromFrenchGuiana

AirlinePassengersin201?%share….Others

19TheWorldBankdoesnotincludeFrenchGuianainitsrankingbyincomelevel.

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countriesofdirectdestination;Numberofinternationalpassengers387thousand; Numberofflights2.9thousand;SAMRegion(%ofinternationaltraffic)*IncludesrouteswithorwithoutstopsSource:IATA

French Guiana has 1 operating airport for international flights, that of Cayenne‐Rochambeau located in thecapital cityofCayenne.A totalof387 thousandpassengerswere transported in 2015 between French Guiana and domestic and internationaldestinations,amountingto4.3%morethanthepreviousyear.Thenumberofpassengershas declined slightly over the past 5 years (2010‐2015) by an average of ‐1.1% perannum.Insofarasavailableseatingisconcerned,routesflownto/fromFrenchGuianain2015 had 596 thousand seats available. Considering the total number of passengersarriving in or departing from FrenchGuiana directly or indirectly (387 thousand), theoccupancyratewasofapproximately65%.Charts 4.8.3 – Evolution in number of passengers, flights and available seats

EvolutioninnumberofinternationalpassengersAvailableseatsandnumberofflightstotheprincipal

destinationsin2015Thousandsofpassengers ThousandsofavailableseatsflightsFrance;…Brazil

Source:IATAIATA records show that in 2015 a total of 7 commercial airlines operated direct andindirect routes from/to the territory, of which 75% of the traffic consisted of directroutesoroneswithimmediateconnections.TraffictotheSAMRegionaccountedfor3%of the total international traffic to/from French Guiana. In terms of countries ofdestination, 7 countries were directly connected, with or without stops, with FrenchGuiana over 7 international routes. In the SAM Region, French Guiana was connecteddirectlynon‐stopwith15%oftheStates:SurinameandBrazil.Charts 4.8.4 – Main countries connected with French Guiana

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Maindestinations/originsofdirectand MaincountrieswithdirectroutestoFrenchindirectroutestoFrenchGuiana GuianaThousandsofpassengersFrance;…Brazil;…Spain;…U.S.;Italy ThousandsofpassengersFrance;…Brazil;…U.S.Source:IATA

Outofitstotal(directandindirect)internationalairtraffic,Martinique,GuadeloupeandBrazilarethecountrieswiththemostconnectivitywithFrenchGuianaandaccountedin2015forover86%ofitstotalpassengerairtraffic(65.6%,13.6%and7.1%ofthetotal,respectively). Ifweconsiderdirectroutesonly, thesamecountriesareresponsible forthemain routes and together represented 97% of the total traffic on direct routes in2015(76.2%,13,7%and7.3%,respectively).Themainairlineswithdirectand indirect flights insideandto/fromFrenchGuianaareAir France with a share of over one‐half of the total passengers transported in 2015(65.6%), followed in secondplacebyAirCaraibeswith26.6%and thirdbyCAIREdbaAirAntillesExpresswith2.9%.Figure4.8.1–MapofFrenchGuiana’spassengerairconnectivitywiththeworld

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EEUUFRANCIA

SURINAME

MARTINICAGUADALUPE

HAITI

BRASIL

GUYANA FRANCESA


ThemapaboveshowsallofFrenchGuiana’srouteswiththeworld.Inordertobeabletooperate those routes, airlines require operating licenses to fly between the points oforiginanddestinationfordirectflightswithorwithoutstops.Directnon‐stoproutesareshowninblueanddirectrouteswithstops,inred.AnnexAlistsallofthedirectnon‐stoproutesbyairport.

AirCargoVery little cargo is transported by air to/from French Guiana and for that reason nosignificantfiguresareavailable.Mostcommercialcargoisshippedbysea.Furthermore,asaFrenchterritory, itdoesnotreport individualizeddatawithintheSAMRegionanddoesnotbelongtoIATA’sCASSprogramme.DRAFT

SWOTAnalysis–FrenchGuiana’sConnectivity

Strengths

GeographiclocationontheAtlanticcoastinnorthernSouthAmerica CloserelationshipwiththeGovernmentofBrazilindevelopingtradeandconnectivity. Centresoftouristattractionthatcontributetoeconomicgrowthandthecreationofemployment. Biodiversitythatfavoursecotourism. The main airports are located in Saint‐Laurent du Maroni and Cayenne, where the heaviest passenger traffic and tourism areconcentrated.

Opportunities

Growthoftheglobaldemandfortourism. EconomicgrowthofStateslikeChinaandIndiaandoftheAsia‐PacificRegion. Tradeglobalization. API(AdvancedPassenger Information) technology for immigrationprocesses,withsecure,encryptedelectronic transmissionsandalargercapacitytohousepassengerdata.

Industry technology that facilitatesandsimplifiespassengercheck‐inandembarkation,with rapid immigrationandsecuritycontrolprocesses.

Partnershipsandagreementswiththeregion’sairlines. SigningofnewbilateralandmultilateralTransportServicesAgreements(ASAs). Sharedcodepartnershipsandagreementswithintheregion. Agreementsandintegrationwithoneormoreoftheregion’sStatestoattracttourismfromdistantcountries.

Weaknesses

Reactive,ratherthanproactive,managementinthedevelopmentofinfrastructure. Passengertaxes:CivilAviationTax,SolidarityTax,andairporttaxes(2). Airportcheck‐in,security,customs,immigrationandembarkationprocesses. Bilateralandmultilateralairservicesagreements(ASAs)continuetooperatewithinanenvironmentofregulatoryprotectionismandhavenotbeenbroughtintolinewiththenewmarketconditionsandthecharacteristicsofthecurrentglobalizationprocess.DRAFT

103

Threats

Unforeseeableterroristactshaveanegativeimpactonthesecurityoftheindustry. Globaleconomiccrisisorrecession. Communicablediseases. Fluctuationsinoilpricesraiseindustrycosts.

DRAFT

4.9. PanamaGeneralDescriptionPanamaisoneofthemostprosperouseconomiesintheSAMRegionandinrecentyearsitseconomicgrowthhasbeenprominentatthegloballevel,withanaverageannualGDPgrowthratefortheperiod2001‐2013of7.2%andannualgrowthratesof6.2%and5.8%in2014and2015,respectively.Withapopulationof4millionandatotalGDPofUS$52billion,itspercapitaGDPofUS$13.0thousandplacesitintheWorldBankclassificationamong the “middlehigher‐income”economies. It alsopossessesa totalof5 recognizedUNESCOWorldHeritagesites(3naturaland2cultural).Charts 4.9.1 – Main macroeconomic indicators and GDP evolution


GDP (2015) US$ billion; GDP growth 2010‐2015 Annualaverage;Per capitaGDP (2015) US$percapita; Population(2015) 3.9 million; Unemployment rate (2014); Inflation(2015);Internationaltrade(2015)115%ofGDP;Spendingontourism(2014)1.1US$billion;Travelandtourism(%ofGDP)WEF2015Report

EvolutionoftotalandpercapitaGDP US$billions‐GDP‐PercapitaGDP

Source: IMF, WB and WEF. Latestavailabledata

The country has been able to take advantage of its strategic geographic location toposition itself as one of the world’s most important hubs and to offer a significantplatformofmaritime,commercial, realestate, financialandotherservices. Tourismisone of the country’s foremost economic activities, not only because of the peopleinterestedinbecomingacquaintedspecificallywithPanamaanditsbeachesandtouristattractions, but also because of the business travellers who visit the territory and in‐transitpassengerswhodecidetomakeastoptoseethecountry.WorldBankinformationrevealsthatin2015,PanamaexportedatotalofUS$26billion,equivalent to 54%of itsGDP. Furthermore, its international trade (exports + imports)represents115%ofitsPBI,showingtheimportanceofitslevelofimports.AtotalofUS$1 billionwas spent on tourism in 2014, for its part. The number of inbound touristsreached 1.7 million, or 5.2% more than the previous year, while outbound touristsamountedto706thousand(anincreaseof14.1%overthefigurefor2013).

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Evolutionofexportsofgoodsandservices EvolutioninthenumberoftouristsUS$billions‐Exports(US$)‐Exports(%ofGDP) Millions‐Inboundtourists‐OutboundtouristsSource:WB

AirConnectivityCharts 4.8.3 – Main aviation industry data OperationalData–AviationIndustry in

2015

Number of airports; Airlines with direct routes (Sept2016);Numberofinternationalroutes(2016)*;Numberofcountriesofdirectdestination;Numberofpassengers13.4million: Embarked/disembarked 4.3 million; In‐transit9.1million;Numberofflights140.8thousand;SAMRegion(%ofinternationaltraffic)*Includesdirectrouteswithorwithoutstops


Panama

Map ofPanama’sdomesticconnectivity

AirlinePassengersin2015%share…OthersSource:TocumenInternationalAirport

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Panama has 18 operating airports, of which 6 are international, according to ICAO.Tocumen International (PTY) in Panama City concentrates the greater part of thepassenger traffic,with a 91% share of total passengers embarked and disembarked in2015.According todatasuppliedbyTocumenInternationalAirport, theairporthandled totalpassengerairlinetrafficof13.4millionpeople. Ofthese,32%correspondedin2015topassengerswithaflightoriginorfinaldestinationinPanama,amountingto4.3million,or4.3%morethanthepreviousyear.Thisnumberhasrisenanaverageof7.9%annuallyover thepast5years (2010‐2015). It shouldbestressed thatPanama isan importanthub intheSAMRegionandthat its in‐transit traffic isgreaterthanthetotalnumberofpassengers embarking/disembarking from or to its territory. In 2015, passengers in‐transitthroughPanamatotalled9.1million(68%ofthetotaltraffic),showingadynamicgrowthof5.5%overthepreviousyear,andacumulativegrowthof17.7%overthe2010‐2015period.Insofarasavailableseatsareconcerned,accordingtoIATA,theroutesflownin2015to/from,in‐transitorinsidePanamashowedanavailablecapacityof18.2millionseats.Consideringthetotalnumberofpassengersembarked/disembarkedinthecountryandin‐transit(13.4million),theoccupancyratewasofapproximately74%.Charts 4.9.4 – Evolution in the number of passengers, flights and available seats

Evolutioninthenumberofpassengers Availableseatsandnumberofflightstodirect

Millions‐Passengersembarked/disembarked‐Passengersin‐transit destinationsin2015 Thousandsofavailableseatsflights U.S;….Brazil;…Dom.Rep.Source:IATA,TocumenInternationalAirport

Charts 4.9.5 – Main countries connected with Panama DRAFT

107

Maindestinations/originsofdirectandindirect MaincountrieswithdirectroutestoPanamaroutestoPanamaThousandsofpassengersU.S;….Dom.Rep.;…Brazil ThousandsofpassengersU.S;.…Brazil;Dom.Rep;…PeruSource:IATA,TocumenInternationalAirport

IATArecordsshowthatin2015,atotalof26airlinesoperatedregulardirectandindirectroutesfrom/toandinsidethecountry.AccordingtoTocumenInternationalAirport,lessthan 1% of the total traffic consisted of domestic flights. Traffic to the SAM Regionrepresents42%ofthetotalinternationaltrafficto/fromPanama.Insofarascountriesofdestinationareconcerned,37areconnecteddirectlywithorwithoutstopswithPanamaover 85 international routes (the route to Turkey was opened in 2016). In the SAMRegion,Panamawasconnecteddirectlyandnon‐stopwith85%oftheStates:Argentina,Brazil,Bolivia,Chile,Colombia,Ecuador,Guyana,Panama,Paraguay,Peru,UruguayandVenezuela.Furthermore, according to IATA, out of the total international air traffic originating orending inPanama (direct and indirect), theUnitedStates,ColombiaandVenezuelaarethecountrieswiththemostconnectivitywithPanamaandaccounted in2015 formorethan51%ofthetotalairpassengertraffic(25.9%,17.7%and8.2%,respectively).Alookat only the direct routes (including in‐transit passengers) reveals that, according toTocumen International Airport, the United States, Colombia andMexico represent themostimportantroutesandtogetheraccountedformorethan42%ofthetotaltrafficoverthemostimportantroutesin2015(20.4%,14.2%and7.5%,respectively).DatasuppliedbyTocumenInternationalAirportrevealsthatthemainairlineswithdirectflightsinandoutsidePanama(includingin‐transitpassengers)areCopa,withashareofalmost three‐quartersof the totalpassengers transported in2015(70.7%), followed insecondplacebyAeroRepúblicawith12.3%andUnitedAirlinesinthirdwith2.9%.

Figure 4.9.1 – Map of Panama’s passenger air transport connectivity with the world

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CANADA

MEXICO

TRINIDAD Y TOBAGO

BAHAMASCUBA

HAITI

CHILE

EEUU

PERU

BRASIL

PARAGUAY

URUGUAYARGENTINA

COSTA RICA

HONDURASGUATEMALA

HOLANDA

ESPAÑA

GUYANA

NICARAGUA

EL SALVADOR

ECUADOR

FRANCIA

R. DOMINICANA

VENEZUELA

ALEMANIA

TURQUIA

CAIMAN

ARUBAJAMAICA

PORTUGAL

BOLIVIA

PUERTO RICOSAINT MARTEN

(2016)

COLOMBIA

BELICE

PANAMA CURACAO

Source:IATA.Preparation:In‐houseThemapaboveshowsallofPanama’sdirectrouteswiththeworld.Inordertobeabletooperate those routes, airlines require operating licenses to fly between the points oforiginanddestinationfordirectflightswithandwithoutstops. Directnon‐stopflightsareshowninblueanddirectflightswithstops,inred.AnnexAliststhetotaldirectnon‐stopflightsbyairport.Cargo

According to IATA, a total of 22 thousand tonnes of cargowere transported by air. Itshould be explained that these figures consider only the tonnes reported by airlinesbelonging to the CASS (Cargo Accounts Settlement Systems) programme. Its mostimportanttradingpartnerintermsofaircargoistheUnitedStateswithashareof40%,followed by Colombiawith 13% andGuatemala in third placewith 7%. Furthermore,according to Tocumen International Airport, 74% of the total cargo is flown by cargocompaniesand23%bycommercialairlines.


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EvolutionofaircargooriginatinginPanama Mainaircargodestinationsin2015Thousandsoftonnes US.40%;…Others17%Source:IATACompetitivenessoftheIndustryAccordingtotheWorldEconomicForumranking,Panamaoccupiesthe34thposition‐‐theSAMRegionStatewiththesecondhighestglobalranking—outofatotalof141countriesanalyzedintermsofthecompetitivenessoftheirtravelandtourismindustriesin2015.Alook at some individual indicators reveals that the country iswell‐positioned as to thequality of its air transport and tourism infrastructure and themarketing of its touristattractions.Evenso,thereisstillroomforimprovementinotherareaslikethequalityofitsdomestictransportsystem,thenumberofregionalagreementsineffectandthelevelofitsairportcostsincomparisonwiththoseoftherestoftheworld’scountries.


ScorerangeScoreRankingTravelandtourismcompetitivenessindexSpecificindicators(scorerange)PrioritizationbythegovernmentoftheindustryEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetwork

DRAFT

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VisarequirementsOpennessofbilateralserviceagreements(ASAs)Airfaretickettaxesandairportcharges

Source:WEF

DRAFT

SWOTAnalysis–Panama’sConnectivity

Strengths

Privileged geographic location comparedwith the restof the continents. Keypoint for flight connections and traffic from/toSouthAmericaandtheworld.

Liberaleconomicmodel.

Panamahasaninternationalbankingcentrethatreceivesvisitorsfromacrosstheworld.

Centresoftouristattraction(culture,naturalresourcesandbusinesstourism)

Partnershipsamongtheregion’sairlines.

TocumenairportwasthefirsthubtobedevelopedintheregionanditistherethatCOPAhasestablisheditscentreforconnectionswiththerestoftheworld.

COPAleadstheincreaseinoperationsfrom/toPanamawithnewdestinationsintheSAMRegion.

Operationofover16aircargocarriersthattransportimportstotheColonFreeTradeZoneprincipallyfromJapan,China,SouthKoreaandtheU.S.andinterconnectperishableseacargoreachingthesouthernpartoftheregionwiththeUSandEUROPE.

Proactive government policy for developing infrastructure for the Tocumen airport, with expansion andmodernization projects tocovertheprojectedtrafficdemand.

Easyaccessroutestotheairport.

PilottrainingschoolsupportedbyCOPA.

Opportunities



Tradeglobalization.

Industry technology facilitates Panama departure check‐ins and in‐transit processing, with rapid processes including immigrationformalitiesandsecuritycontrols.DRAFT

112

PartnershipsandagreementsamongcountriesintheSAMRegion;interlinecommercialagreements.

Simplificationofcustomsregulations.

GreateropennesstotradeonthepartofmostStatesintheregioninordertooffermoreairliberalization(ASAs).

Differentfreetradeagreementsandpartnershipsinsideandoutsidetheregion.

Agreementsandintegrationwithoneormoreoftheregion’sstatestoattracttourismfromdistantcountries.

Weaknesses

Highairportcostsandcharges.$50departuretaxfromPanama.

AirfareticketssubjecttothepaymentofVATandtaxchargesforembarkation,security,facilitationandthesector’sdevelopment.

Bilateralandmultilateralairservicesagreements(ASAs)continuetooperatewithinanenvironmentofregulatoryprotectionismonthepartoftheStatesorofoneoftheStates,thathasnotbeenbroughtintolinewiththenewmarketconditionsandcharacteristicsofthepresentglobalizationprocess.

TheWorldTradeOrganization(WTO)grantedPanamaanAirLiberalizationIndexof11.75(2013)onascaleof0‐50(thehighertheindex,thegreatertheliberalization).

Threats





Climatechangeand/ornaturaldisasters.

DRAFT

4.10 ParaguayGeneralDescriptionParaguayisoneofthesmallestterritoriesintheSAMRegion,withatotalpopulationofabout7millionandaGDPofUS$28billion.ItspercapitaGDP(US$4.0thousand)placesit among the “higher middle‐income” economies, according to the World Bankclassification.Itpossesses1recognizedUNESCOWorldHeritageculturalsite.

Charts 4.10.1 – Main macroeconomic indicators and GDP evolution

EvolutionoftotalandpercapitaGDPBillionsofguaranis‐GDP‐PercapitaGDPMillionsofguaranis


GDP (2015) – US$ billion; GDP growth 2010‐2015 – Annualaverage;PercapitaGDP(2015)‐US$percapita;Population(2015) – Million; Unemployment rate (2014); Inflation(2015); International trade(201?) ‐%ofGDP;Spendingontourism(2014)–US$Million;Travelandtourism(%ofGDP)‐WEF2015Report

Source:IMF,WBandWEF.Latestavailabledata.

Agriculture,stockbreedingand theproductionofhydroelectricenergyare itseconomicdrivers and, according to the World Bank, are responsible for over 60% of its totalexports.

World Bank figures reveal that in 2014 Paraguay exported a total of US$14.5 billion,amountingto47%ofitsGDP.Furthermore,itsinternationaltrade(exports+imports)isequivalentto82%ofitsGDP.Insofarastourismisconcerned,totalspendingin2014wasUS$ 449million. The number of inbound touristswas 649 thousand, up 6.4% on theprevious year, while outbound tourists totalled 462 thousand (5.0% more than thepreviousyear).

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AirConnectivity

Charts 4.10.3 – Main aviation industry figures

Operationaldata–AviationIndustry2015

NumberofairportsAirlineswithdirectroutes(Sept2016)Numberofinternationalroutes*NumberofcountriesofdirectdestinationNumberofpassengers894thousandDomestic12thousandInternational882thousandNumberofflights10.7thousandSAMRegion(%ofinternationaltraffic)*Includesdirectrouteswithorwithoutstops


ParaguayAirlinePassengersin201?%share

MapofParaguay’sdomesticconnectivity

ARGENTINA

URUGUAY

BRASILPARAGUAY

BOLIVIA

CHILE

…OthersSource: IATA

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Paraguay has 2 operating airports for international flights; of these, Silvio PettirossiInternational Airport (ASU) located in the city of Luque near Asuncion concentratesalmostallofthepassengertraffic,withasharein2015of98%.A total of 894 thousand passengers were transported to international and domesticdestinationsin2015,aminimumincreaseof0.05%overthepreviousyear.Thenumberofpassengershasrisenanaverageof1.9%perannumoverthepast5years(2010‐2015).Insofarasavailableseatsareconcerned,routesto/fromandinsideParaguayin2015hadan available seating capacity of 1.4millionwhich, comparedwith the total number ofpassengersflyingdirectandindirectroutes(894thousand),revealedanoccupancyrateofapproximately62%.

Charts 4.10.4 – Evolution in the number of passengers, flights and available seats

Evolutioninthenumberofpassengers Availableseatsandnumberofflightstodirect destinationsin2015Thousandsofpassengers‐Passengersoninternational Thousandsofavailableseatsflightsflights‐Passengersondomesticflights Brazil;…U.S.;SpainSource: IATA

According to IATArecords,a totalof11commercialairlinesoperatedscheduleddirectandindirectflightsfrom/toandinsidethecountryin2015,ofwhich54%correspondedtodirect flightsorflightswith immediateconnections. Furthermore,99%of thetrafficconsistedofinternationalflightsand1%ofdomesticflights. Abreakdownbycountriesofdestinationreveals10countries tobedirectlyconnectedwithorwithoutstopswithParaguayover14internationalroutes.TraffictotheSAMRegionaccountedfor67%ofthe total international air carrier traffic to/fromParaguay,which is directly connectedwith 54% of the region’s States: Argentina, Brazil, Bolivia, Chile, Panama, Peru andUruguay.Charts 4.10.5 – Main countries connected with Paraguay

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Maindestinations/originsofdirectand MaincountrieswithdirectroutestoParaguayindirectroutestoParaguayThousandsofpassengers:…Brazil;U.S.;…Spain;…Germany Thousandsofpassengers:…Brazil;…U.S.;Spain;ItalySource: IATA

Out of its total international air traffic (direct and indirect), Argentina, Brazil and theUnited States are the countrieswith the greatest connectivitywithParaguay andwereresponsible for over 55%of the total passenger air traffic in2015 (23.7%, 17.5%and14.2%,respectively). AlookatthedirectroutesonlyrevealsthatArgentina,BrazilandBoliviaenjoythehighestdegreeofconnectionwithParaguayandaccountedtogetherforover 71% of the total traffic on direct routes in 2015 (42.3%, 20.1% and 8.7%,respectively). The main airlines with direct and indirect flights inside and to/fromParaguayareLATAMAirlinesBrasilwithashareof18.1%,followedinsecondplacebyLATAMAirlinesParaguaywith17.9%andCopainthirdplacewith14.5%.Figure4.10.1–MapofParaguay’spassengerairtransportconnectivitywiththeworld

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CHILE

EEUUESPAÑA

BRASIL

URUGUAYARGENTINA

PERU

BOLIVIA

PARAGUAY

PANAMA


Themap shows all of Paraguay’s direct routeswith theworld. In order to be able tooperatethosedirectroutes,airlinesrequireoperatinglicensesfromthepointoforigintothedestinationfordirectflights,whethernon‐stoporwithstops. Itshouldbestressedthatinthiscaseallarenon‐stoproutes.AnnexAlistsallofthedirectnon‐stoproutesbyairport.

MainCargoFiguresAccordingtoParaguay’sCivilAviationAdministration,atotalof5.7thousandtonnesofcargoweretransportedin2015from/toAGTairport(‐36%lessthanthepreviousyear)and12.2thousandtonnesofcargofrom/toASUairport(+11%morethanin2014)onall‐cargo and scheduled flights. Of these, 93% and 84%, respectively, correspondedexclusively to imports. It should be added here that Paraguay is not registered withIATA’sCASS(CargoAccountsSettlementSystems)programme.

Charts 4.10.6 – Main air cargo figures Evolution of air cargo at AGT (import/export) Evolution of air cargo at ASU (import/export) Thousands of tonnes Thousands of tonnes

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Source: Paraguayan Civil Aviation Administration

CompetitivenessoftheIndustryIn theWorld Economic Forum competitiveness ranking, Paraguay occupies the 113rdpositionoutofatotalof141countriesanalyzedintermsofthecompetitivenessoftheirtravel and tourism industries in 2015. The analysis of certain individual indicatorsrevealsthatParaguayneedstoworkaboveallonimprovingitsairtransportandtourisminfrastructure and domestic transport system, in addition to prioritizing governmentattentiontotheindustrytoensureitsappropriatedevelopment.

Table4.10.1–Competitivenessofthetravelandtourismindustryin2015 ScorerangeScoreRanking

TravelandtourismcompetitivenessindexSpecificindicators(scorerange)PrioritizationbythegovernmentoftheindustryEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetworkVisarequirementsOpennessofbilateralserviceagreements(ASAs)AirfaretickettaxesandairportchargesSource:WEF

DRAFT

SWOTAnalysis–Paraguay’sConnectivity

Strengths

Socialstabilityandfreemarketeconomy.

Centresoftouristattractionandadecadeofsustainedgrowth.

Economicinvestmentcentres.

Developmentofnationalaviationwiththeunrestrictedparticipationofforeigncapital.

CommercialpartnershipswithSAMRegionairlines.

Operationof“low‐cost”airlines.

Paraguayhastariffderegulationandanopenskiespolicy.

Eliminationoftaxesonaviationfuel.

AgreementswithArgentina,UruguayandBraziltoavoiddoubletaxation.

AgreementwithSpaintodevelopairtraffic.

CreationofAmaszonasParaguayasanationalairline.

Competitiveratesandrapidityincargotransportationincomparisonwiththecostofgroundtransportationoverthesameroute.

Opportunities



Tradeglobalization.

Interestofforeignairlinesinenteringintothecreationofnewairlines.

API(AdvancedPassengerInformation)technologyforimmigrationprocessesusingsecure,encryptedelectronictransmissionswithaDRAFT

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greatercapacityforhousingpassengerdata.

Industrytechnologythatfacilitatesandsimplifiespassengercheck‐inandembarkation,withrapidimmigrationformalitiesandsecuritycontrols.

Tourismagreementsandintegrationwithoneormoreoftheregion’sStatestoattracttourismfromdistantcountries.

Increaseincargoconnectivity.

Weaknesses

Reactiveoverproactivemanagementindevelopinginfrastructure.

Airfare tickets subject to thepaymentof a10%VATondomestic tickets and10%of25%of thevalueof international tickets, andtransporttaxesandchargesforairportuse.

Slowairportcheck‐in,security,customs,immigrationandembarkationprocesses.

TheWorldTradeOrganization(WTO)grantedParaguayanAirLiberalizationIndexof10.00(2013)onascaleof0‐50(thehighertheindex,thegreatertheliberalization).

Applicationofreciprocityinvisaapplications,whenthecountryhaspoliciesinplacetoeliminatetradebarriers.

NoplansarebeingconsideredforexpandingthecargoterminalsattheAsuncionairport.

Threats






DRAFT

4.11 PeruGeneralDescriptionPerutodayisoneofthemostprosperousandpromisingeconomiesintheSAMRegion,with apopulationof32millionanda totalGDPofUS$192billion. Itsper capitaGDP(US$6.0thousand)placesitamongthe“uppermiddle‐income”economies,accordingtotheWorldBankclassification.Atthesametime,thecountry’snaturalandculturalwealthmake it one of the foremost tourist destinations in the region, with a total of 12recognized UNESCO World Heritage sites (2 natural, 8 cultural and 2 mixed).Furthermore, its geographic location within the region makes it a privileged point ofaccesstoothercountries.Charts 4.11.1 – Main macroeconomic indicators and GDP evolution

EvolutionoftotalandpercapitaGDPS/.billions‐GDP‐PercapitaGDPS/.Thousands


GDP (2015) US$ billion; GDP Growth 2010‐2015 Annualaverage; Per capitaGDP(2015)US$percapita; Population(2015) 32 million; Unemployment rate (2014); Inflation(2015);Internationaltrade(201?)45%ofGDP;Spendingontourism (2014) 2.1 US$ billion; Travel and tourism (% ofGDP)WEF2015Report

Source:IMF,WBandWEF.Latestavailabledata

Peru’seconomy,likemanyofthoseintheregion,restsontheexploitationofitsnaturalresources and the marketing of raw materials. Mining, gas, agriculture, fishing, andstockbreeding are some of the main sectors that drive its economy. The country’ssignificanteconomicgrowthinrecentyears,combinedwithprudentfiscalandmonetarymanagement fostered the formation of a scenario of low inflation and high growth,positioningthecountryasahighlyattractiveterritoryforforeignandlocalinvestors.AccordingtodatapublishedbytheWorldBank,in2014PeruexportedatotalofUS$45billion,amountingto22%ofitsGDP.Atthesametime,itsinternationaltrade(exports+imports)isequivalentto45%ofitsGDP.Inthecaseoftourism,totalspendingin2014amountedtoUS$2billion.Ithadatotalof3.2 million inbound tourists, up 1.6% on the previous year’s figure, while outboundtouriststotalled2.4million(3.3%morethanthepreviousyear).


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AirConnectivityCharts 4.11.3 – Main aviation industry figures Operationaldata–AviationIndustryin2015

Numberofairports;Airlineswithdirectroutes(Sept2016);Number of international routes (Sept 2016)*; Number ofcountries of direct destination (Sept 216); Number ofpassengers 15.2 million; Domestic 8.8 million;International 6.5 million; Number of flights 161.5thousand;SAMRegion(%ofinternationaltraffic)*Includesdirectrouteswithorwithoutstops

Mainairlineswithflightsinsideand

to/fromPeruAirlinePassengersin201?%share

Others;TotalSource:IATA

MapofPeru’sdomesticconnectivity

Peruhas22 operating airports, ofwhich8 are international, according to ICAO. JorgeChávez International Airport (LIM) located in the city of Lima and Alejandro Velasco

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Astete International Airport in the city of Cusco are the most important and accountjointlyforover76%ofthepassengertraffic(65%and11%,respectively).A total of 15.2 million passengers were transported in 2015 to international anddomesticdestinations,foragrowthof11.9%overthatofthepreviousyear.Thenumberofpassengers transportedover thepast5 years (2010‐2015)has grownanaverageof12.2% per annum (+78% cumulative growth for this 5‐year period). In the case ofavailable seats, routes flown to/fromand insidePeru in2015had an available seatingcapacity of 22.5 million. Considering the 15.2 million passengers that flew direct orindirectroutes,theoccupancyratewasofapproximately68%.

Charts 4.11.4 – Evolution in number of passengers, flights and available seats

Evolutioninnumberofpassengersandflights Available seats and number of flights tomaindestinationsin2015

Millions‐Passengersoninternationalflights Millionsofavailableseatsflights‐Passengersondomesticflights U.S;Chile;….BrazilSpain….Source:IATA

IATArecordsrevealthat27commercialairlinesoperatedscheduleddirectandindirectroutesfrom/toandinsidethecountryin2015,with80%oftheflightscorrespondingtodirectroutesorrouteswithimmediateconnections.Atthesametime,42%ofthetrafficconsistedofinternationalflightsand58%ofdomesticflights.TraffictotheSAMRegionaccountsfor45%ofthetotalinternationaltrafficto/fromPeru.Intermsofcountriesofdestination, 22 were directly connected with Peru, whether non‐stop or with stops(routes with the U.K. and South Africa have been operating since 2016) over 46internationalroutes.IntheSAMRegion,ithaddirectnon‐stopconnectionswith77%ofthe States in the region: Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Panama,Paraguay,UruguayandVenezuela.Charts 4.11.5 – Main countries connected with Peru

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Maindestinations/originsofdirectand MaincountrieswithdirectroutestoPeruindirectroutestoPeruThousandsofpassengersU.S;…Brazil;…Spain;…Italy ThousandsofpassengersU.S.;…Brazil;…SpainSource:IATA

Outof itstotalinternationalairtraffic(directandindirect),theUnitedStates,ChileandColombiaarethecountrieswiththegreatestconnectivitywithPeru,accountingforover40% of the total passenger air traffic of 2015 (22.7%, 10.5% and 8.0%, respectively).Consideringonlythedirectroutes, theUnitedStates,ChileandArgentinarepresentthemostimportantandweretogetherresponsibleformorethan46%ofthetotaltrafficoverdirect routes in 2015 (21.6%, 15.3% and 9.5%, respectively).The principal airlines with direct and indirect flights inside and outside Peru in 2015were LATAMAirlines Group20with a 48.5% share of the total passengers transported,followedbyAviancawith15.8%andPeruvianinthirdplacewith8.8%.

Figure4.11.1–MapofPeru’spassengerairtransportconnectivitywiththeworld

20DoesnotincludealloftheairlinesassociatedwiththeLATAMGroup.ThedatabaseprovidedbyIATAincorporatesChileandPeruunderitsheading(LATAMAirlinesGroup),whiletherestoftheGroupcompaniesarerecordedindividually.

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CANADA

MEXICO

R. DOMINICANACUBA

CHILE

EEUU

PERU

BRASILPARAGUAY

URUGUAYSUDAFRICA

ARGENTINA

HOLANDA(2006)

(2006)

REINO UNIDO

PANAMAEL SALVADOR

COSTA RICA

ECUADOR

BOLIVIA

FRANCIA

ESPAÑA

COLOMBIAVENEZUELA


ThemapaboveshowsallofPeru’sdirectrouteswiththeworld. Inordertobeabletooperatethoseroutes,airlinesrequireoperatinglicensesbetweenthepointsoforiginanddestinationfordirectflights,whethernon‐stoporwithstops.Directnon‐stoproutesareshowninblueanddirectrouteswithstops,inred.AnnexAlistsallofthedirectnon‐stoproutesbyairport.AccordingtoPeru’sGeneralDirectorateforCivilAviation(DGAC),atotalof205thousandtonnes of air cargo were transported in 2015. IATA, for its part, estimates that theamountsrecordedforPeruintheCASS(CargoAccountsSettlementSystems)programmerepresent approximately 55% (114 thousand tonnes) of the total. According to thatinformation,theUnitedStateswasitsmaintradingpartnerwithan80%share,followedbySpainwith9%andFranceinthirdplacewith3%.Charts 4.11.6 – Main air cargo figures

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EvolutionofaircargooriginatinginPeru Mainaircargodestinationsin2015ThousandsofTonnes ……France2%Brazil2%Others7%Source:IATA

CompetitivenessoftheIndustryAccording to the World Economic Forum competitiveness ranking, Peru occupiedpositionnumber58outofatotalof141countriesanalyzedastothecompetitivenessoftheirtravelandtourismindustriesin2015.Intermsofindividualindicators,itrankedanoteworthy 19th in the effectiveness of itsmarketing and branding to attract tourists,reflectingitspositioningasanimportanttouristdestinationintheSAMRegion.Thereisstill room towork on the quality of its domestic transport network and air transportinfrastructure,aswellasonitshighlevelofairportcharges.


ScorerangeScoreRankingTravelandtourismcompetitivenessindexSpecificindicators(scorerange)PrioritizationbythegovernmentoftheindustryEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetworkVisarequirementsOpennessofbilateralserviceagreements(ASAs)AirfaretickettaxesandairportchargesSource:WEF

DRAFT

SWOTAnalysis–PeruvianConnectivity

Strengths

PrivilegedgeographiclocationatthecentreofSouthAmerica.

Centresoftouristattractioninthecountry’sthreeregions;historyandculture,biodiversityandecotourism.

Economicinvestmentcentres.

Cargooperationsfrom/totheU.S.,SouthKoreaandEurope,supportingitsexports.

Code‐sharingagreementsbetweennationalairlinesandthoseofStatesintheSAMRegionandtheworld.

Operationof“low‐cost”airlinesinthenationalandinternationalmarkets.

Beginningofdirectinternationalflightsto/fromtheChiclayoandCuscoairports(decentralizationfromLima).

DevelopmentplanforahubairportinChiclayothatwillimprovedirectconnectivitywithnorthern,centralandsouthernPeru.

Opennesstoinvestmentsofupto75%foreigncapitalinnationalairlines(CivilAeronauticsLawanditsregulations)

ConstructionoftheChinchero–Cuscoairportprojectedtocoverademandfordirectflightsfromabroadthreeorfourtimesthesizeofthecurrentdemand.(2021)

ThestartofoperationsisbeingexpeditedinPisco(2016),whichispreparedtoaccommodateinternationalcargocarriersandlow‐costairlineswithnationalandinternationalflights.

OperationofacertifiedpilottrainingschoolinPisco.

Opportunities



Tradeglobalization.

Interestofforeignairlinesinnationalaviation.

DevelopmentofamodelMasterPlanandcertificationofairports

SigningoftheFortalezaagreement.DRAFT

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API (Advanced Passenger Information) technology for immigration processes using safe, encrypted electronic transmissionswith agreatercapacityforhousingpassengerdata.

Investmentinsecurityandairnavigationsystems.

Industry technology that facilitates and simplifiespassenger check‐in andembarkationwith rapid immigrationand security controlprocesses.

PartnershipsandagreementswithSAMRegionairlines.

DifferentfreetradeagreementsandpartnershipssignedbyPeru.(FTA‐TPP‐APECandPacificAlliance)

IntegrationagreementswithoneormoreSAMRegionStatestoattracttourismfromdistantcountries.

Touristvisapolicy.

Weaknesses

Highairportcostsandcharges(AIJCH)thatarenotcompetitiveanddonotfacilitatethedevelopmentofaviationandoftheexpectedhub.

Theapproachtoinfrastructuredevelopmentandthestrengtheningofahubmustfocusoncapacity,qualityandleadingtheregionincostcompetitiveness.

Reactive,ratherthanproactivemanagementinthedevelopmentofairportinfrastructure,lackofexpeditiousStateprocessesallowingforinvestmentstobemadewhenthedemandsorequires.

CumbersomeandcomplicatedresponsetoinfrastructureproblemsinAIJCH‐Limaairportbecauseofthecontractanditslimitations.

ProcessfortheapprovalandexecutionofroadmaintenanceworkinChiclayoandTrujillolimitscargooperations.

Airportsinthecitycentreandunresolvedproblemsoftheroadsystemandcitizensafety.

AirfareticketssubjecttothepaymentofVAT(18%),tourismtaxandchargesforairportuse.

Slowairport(longwaitinglines)check‐in,security,customs,immigrationandembarkationprocesses.

Existenceofconsumerprotectionstandardsthatworkagainstthesector’scommercialdevelopment.

CustomsformalitiesandairlineAMD(AeronauticalMaterialsDeposit)managementdelayexportprocesses.

Bilateralandmultilateralairservicesagreements(ASAs)continuetooperatewithinanenvironmentofregulatoryprotectionismandDRAFT

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havenotbeenbroughtintolinewiththenewmarketconditionsofthecurrentglobalizationprocessthatfavoursairliberalization.

TheWorldTradeOrganization(WTO)grantedPeruanAirLiberalizationIndexof10.93(2013)onascaleof0‐50(thehighertheindex,thegreatertheliberalization).

PolicyofchargingVATonoverflightrates.

Failureofthetaxauthoritytoacceptandrecognizegeneralagents(GSAs)ofinternationalairlinesthatusetheirTaxRegistry(RUC)for“offlineoperations”,thuslimitingthedevelopmentofaviationinPeru.

Threats

Unforeseenterroristactshaveanimpactonthesecurityoftheindustry.




Citizeninsecuritythreatenspassengerassetsandsafetyandhasanegativeimpactontraffictotheterritory.

Drugtrafficking.


DRAFT

4.12 SurinameGeneralDescriptionSuriname is the independent countrywith the smallest population in the SAMRegion,amountingto558thousandinhabitants.WithatotalGDPofUS$5.2billion,itspercapitaGDP(US$9.3 thousand)places it in thecategoryof “uppermiddle‐income”economies,according to theWorld Bank classification. It possesses 2 recognized UNESCOWorldHeritageSites(1naturaland1cultural).



GDP (2015) US$ 5.2 billion; GDP Growth 2010‐2015 2.6%Annualaverage;PercapitaGDP(2015)US$9,306percapita;Population (2015) 558 thousand Unemployment rate(2014);Inflation(2015);Internationaltrade(201?)91%ofGDP; Spendingon tourism (2014) US$90.0million; Travelandtourism(%ofGDP)WEF2015Report

Source: IMF, WB and WEF. Latest data available

EvolutionoftotalandpercapitaGDP$SRDbillions‐GDP‐PercapitaGDP$SRDthousands

Its economy isheavilygrounded in theextractive sectors (gold,oil andbauxite)and isdependentontheexternalmarket.Asaresult,fluctuationsincommoditypricesstronglyimpactitseconomicperformance.

According to World Bank data, Suriname’s exports in 2014 totalled US$2.3 billion,representing 45% of its GDP, while its international trade (exports + imports) wasequivalentto91%ofitsGDP.Spendingontourism,foritspart,amountedin2014toUS$90 million. There were 252 thousand inbound tourists, 1.2%more than the previousyear.


Evolution of exports of goods and services Evolution in the number of tourists

US$ billions -Exports (US$) -Exports (% of GDP) Millions -Inbound tourists

Source: WB. The World Bank does not record data about outbound tourists.

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AirConnectivityCharts 4.12.3 – Main aviation industry figures Operationaldata–AviationIndustryin2015

NumberofinternationalairportsAirlineswithdirectroutesNumberofinternationalroutes*NumberofcountriesofdirectdestinationNumberofinternationalpassengers457thousandNumberofflights3.5thousandSAMRegion(%ofinternationaltraffic)*IncludesdirectrouteswithorwithoutstopsSource:IATA

Main airlineswithflightsinsideandto/fromSuriname

AirlinePassengersin2015%share….Others

Surinamehas1operatinginternationalairport,JohanAdolfPengelInternationalAirport(PBM). A total of 457 thousand passengers were transported between Suriname andinternationaldestinations in2015,thenumberhaving increasedbyanaverageof3.7%perannumoverthepast5years(2010‐2015).Insofarasavailableseatingisconcerned,in2015, theroutes flownto/fromSurinamehadanavailablecapacityof622 thousandseats. Considering the total number of passengers who arrived in or left Surinamedirectlyorindirectly(457thousand),theoccupancyratewasofapproximately73%.


Evolution in the number of international Available seats and number of flights to principal passengers destinations in 2015

Thousands Thousands of available seats flights

Source: IATA Netherlands; Trinidad & Tobago;…French Guiana;…Brazil; U.S.

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AccordingtoIATArecords,6commercialairlinesoperatedscheduleddirectandindirectflights from/to the country in 2015, with 83% of the traffic corresponding to directroutes or routes with immediate connections. Traffic to the SAM Region represented11% of the total international traffic to/from Suriname. In terms of countries ofdestination, 8 were directly connected, with or without stops, with Suriname over 9international routes. In the SAM Region, the country was directly connected non‐stopwith23%oftheStates:Brazil,GuyanaandFrenchGuiana.

Charts 4.12.5 – Main countries connected with Suriname

Maindestinations/originsofdirectandindirect Main countrieswithdirect routes to Suriname routes toSuriname

Thousandsofpassengers ThousandsofpassengersNetherlands;U.S.;….Brazil;…Trinidad&Tobago;…St.Martin;Dom.RepNetherlands;…U.S.;…..FrenchGuiana

Source:IATA

Out of its total international air traffic (direct and indirect), the Netherlands, UnitedStatesandCuracaoarethecountrieswiththemostconnectivitywithSurinameandwereresponsibleforover71%ofthetotalairlinepassengertrafficin2015(46.7%,13.8%and

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10.4%, respectively). A look at the direct routes only reveals that the Netherlands,CuracaoandBrazilwerethemostimportant,accountingjointlyforover46%ofthetotaltrafficondirectroutesin2015(51.6%,12.4%and10.4%,respectively).The main airlines with direct and indirect flights inside and outside Suriname areSurinamAirwayswithashareofalmostone‐halfof thetotalpassengerstransportedin2015 (45.9%), followedbyKLMwith29.8%,with InselAir International in thirdplacewith12.1%.Figure4.12.1–MapofSuriname’spassengerairtransportconnectivitywiththeworld


ThemapaboveshowsSuriname’stotaldirectrouteswiththeworld.Inordertobeabletooperatethoseroutes,airlinesrequireoperatinglicensesfromthepointoforigintothatofdestinationfordirect flightswithorwithoutstops. Itshouldbestressedthat inthiscaseallarenon‐stoproutes.AnnexAlistsallofthenon‐stopdirectroutesbyairport.AirCargoSinceverylittleaircargoistransportedto/fromSuriname,therearenorelevantfiguresavailable.Mostofthecommercialcargoistransportedbysea.Furthermore,thecountrydoesnotbelongtoIATA’sCASS(CargoAccountsSettlementSystems)programme.CompetitivenessoftheIndustryIn the World Economic Forum competitiveness ranking, Suriname occupies the 101stpositionoutofatotalof141countriesanalyzedintermsofthecompetitivenessoftheirtravelandtourismindustriesin2015.Alookattheindividualindicatorsrevealsthatthecountry still has room to work on bettering conditions that will promote moreconnectivityandproducethesubsequenteconomicbenefits. Workisneededaboveallon improving the air transport infrastructure and the domestic transport network, aswellasontheprioritizationofinvestmentbythegovernmentoftheindustry.

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ScorerangeScoreRanking

Travelandtourismcompetitivenessindex

Specificindicators(scorerange)PrioritizationbythegovernmentoftheindustryEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetworkVisarequirementsOpennessofbilateralserviceagreements(ASAs)Airfaretickettaxesandairportcharges

Source:WEF

DRAFT

SWOTAnalysis–Suriname’sConnectivity

Strengths

Geographic location on the north Atlantic coast of the SAM Region makes it possible to develop traffic to/from the world, takingadvantageoftheregion’sconnections.

U.S.andEuropeansocialstabilityandforeigninvestmentgeneratebusinesstraffic.

Touristattractioncentresstemmingfromitsnaturalwealth.

Airtrafficoperatingoutofitstwoprincipalairports:JohanAdolfPengelInternationalAirportandZorg&Hoopdomesticairport.

Opportunities



Tradeglobalization.

API(AdvancedPassengerInformation)technologyforimmigrationprocessesusingsecure,encryptedelectronictransmissionsignalswithagreatercapacityforhousingpassengerdata.

Industrytechnologiesthatfacilitateandsimplifypassengercheck‐inandembarkation,withrapidimmigrationformalitiesandsecuritycontrols.

Partnershipsandagreementswithairlinesintheregion.

AgreementsandintegrationwithoneormoreStatesintheregiontoattracttourismfromdistantcountries.

Liberalizationofaviationattheregionallevelandintherestoftheworld.

Weaknesses

Reactive,ratherthatproactivemanagementinthedevelopmentofinfrastructureandofmasterplansforairports.


AirfareticketssubjecttothepaymentofVAT,andchargesforsecurity,facilitationandgoodsandservices.DRAFT

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Bilateralandmultilateralairservicesagreements(ASAs)

Stateeconomicpolicymeasures that limit thedevelopmentofexportsand theuseof customs formalitieswith limited technologicalcapacityactasbarrierstothedevelopmentofexports.

Threats






DRAFT

4.13 UruguayGeneralDescriptionUruguay, having eliminated extremepoverty andbeing endowedwith a strongmiddleclass,isrecognizedinternationallybyinstitutionsliketheUnitedNationsandtheWorldBankasbeingoneofthemostequitablecountriesintermsofthedistributionofwealth.Withapopulationborderingon3millionandatotalGDPofUS$54billion,itspercapitaGDP (US$ 15.7 thousand) places it in the World Bank category of “upper‐income”economies.ItpossessestworecognizedUNESCOCulturalWorldHeritagesites.Itisalsooneofthecountrieswiththelowestlevelsofcorruptionintheregionandatthegloballevel.Charts 4.13.1 – Main macroeconomic indicators and GDP evolution


GDP(2015)US$53.8billion;GDPGrowth2010‐2015Annual average; Per capita GDP (2015) US$ 15,748per capita; Population (2015) 3 million;Unemployment rate (2014); Inflation (2015);International trade (201?) 45%ofGDP; Spendingontourism(2014)US$1.6billion;Travelandtourism(%ofGDP)WEF2015Report

Source:IMF,WBandWEF.Latestavailabledata

EvolutionoftotalandpercapitaGDPBillionsofpesos‐GDP‐PercapitaGDPThousandsofpesos

Uruguay has an important agricultural and livestock sector oriented largely towardagroexport(rice,wheat,corn,meat,wool,and leather,amongotherproducts), togetherwithahighlydevelopedindustrialsector(coldstorage,textiles,fertilizers,andoilandgasrefining,amongothers).According to data published by theWorld Bank, in 2014 Uruguay exported a total ofUS$12 billion, amounting to 22% of its GDP, while its international trade (exports +imports)isequivalentto45%ofitsGDP.Totalspendingin2014ontourism,foritspart,

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amountedtoUS$1.6billion. Therewere2.7millioninboundtourists,alevelsimilartothat of the previous year, while outbound tourists numbered 2.4million (up 5.0% onthoseof2013).



AirConnectivityCharts 4.13.3 – Main aviation industry figures Operationaldata–AviationIndustry2015

NumberofairportsAirlineswithdirectroutesNumberofinternationalroutesNumberofcountriesofdirectdestinationNumberofinternationalpassengers1.8millionNumberofflights17.7thousandSAMRegion(%ofinternationaltraffic)*Includesdirectrouteswithorwithoutstops


UruguayAirlinePassengersin2015%share

MapofUruguay’sdomesticconnectivity

ARGENTINA

CHILE

URUGUAY

PARAGUAY BRASIL

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…OthersSource:IATA

Uruguay has 2 operating airports for international flights, of which CarrascoInternationalAirport(MVD)locatedinthecapitalcityofMontevideoconcentratesalmostalloftheinternationalairtraffic(94%).AccordingtodatarecordedbyIATA,over thepast5years(2010‐2015), thenumberofpassengershasgrownanaverageof1.4%peryear,withatotalof1.8milliontravellingto/from Uruguay to international destinations in 2015. Insofar as available seating isconcerned, routes travelled to/from Uruguay in 2015 had an available capacity of 2.5million seats. Considering the total number of passengers who arrived in or departedfrom Uruguay directly or indirectly (1.8 million), the occupancy rate was ofapproximately69%.


Evolutioninthenumberofpassengers AvailableseatsandnumberofflightstoThousandsofpassengers principaldestinationsin2015 Thousandsofavailableseatsflights‐Passengersoninternationalflights ‐Passengerson Brasil;…Spain;…U.S.…domesticflightsSource:IATA

IATArecordsrevealthatin2015,16commercialairlinesoperatedscheduleddirectandindirect routes to/from the country, of which 53% corresponded to direct routes orrouteswith immediate connections. Traffic in the SAMRegion represents 64% of thetotal international traffic to/from Uruguay. Insofar as countries of destination areconcerned, 10 were connected directly with Uruguay, with or without stops, over 22internationalroutes.IntheSAMRegion,Uruguaywasconnecteddirectlynon‐stopwith46%oftheStates:Argentina,Brazil,Chile,Panama,ParaguayandPeru.Charts 4.13.5 – Main countries connected with Uruguay

Main destinations/origins of direct and indirect Main countries with direct routes to Uruguay routes to Uruguay


Brazil;…U.S; ...Spain;…France …Brazil;…Spain; U.S. ;…France

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Source: IATA

Out of its total international air traffic (direct and indirect), Brazil, Argentina and theUnitedStatesarethecountrieswiththemostconnectivitywithUruguayandaccountedfor over 57% of the total air passenger traffic in 2015 (25.4%, 19.5% and 12.6%,respectively).Inthecaseofdirectroutes,theneighbouringcountriesofArgentina,BrazilandChilerepresentedthemost importantonesandtogetherwereresponsible forover74%ofthetrafficondirectroutesin2015(32.9%,27.0%and13.6%,respectively).Themainairlineswithdirectand indirect flights inUruguayareAerolíneasArgentinaswith18.6%,LATAMAirlinesBrasilwith18.2%andLATAMAirlinesGroup21with13.4%.Figure4.13.1–MapofUruguay’sairpassengertransportconnectivitywiththeworld

21DoesnotincludealloftheairlinesassociatedwiththeLATAMGroup.IATA’sdatabaseincorporatesChileandPeruunderthisheading(LATAMAirlinesGroup),whiletherestoftheGroupcompaniesareregisteredindividually.

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CHILE

EEUUFRANCIA

URUGUAYARGENTINA

PERU

PANAMA

BOLIVIABRASIL

PARAGUAY

ESPAÑA


ThemapaboveshowsallofUruguay’sdirectrouteswiththeworld.Inordertobeabletooperatethoseroutes,airlinesrequireoperatinglicensesfromthepointsoforigintothoseofdestinationfordirectflightswithorwithoutstops.Directnon‐stoproutesareshowninblueanddirectrouteswithstops,inred.AnnexAlistsallofthedirectnon‐stoproutesbyairport.Insofarasaircargoisconcerned,accordingtoIATAfigures,atotalof4thousandtonnesof air cargo were transported. The country’s most important trading partner is theUnitedStateswitha30%share,followedbyChilewith21%andBrazilinthirdplacewith16%. Itshouldbestressedthat these figuresconsideronly thetonnesreportedby theairlinesintheCASS(CargoAccountsSettlementSystems)programme.Charts 4.13.6 – Main air cargo figures

Evolution of air cargo originating in Uruguay Main destinations of air cargo in 2015

Thousands of tonnes U.S. 30%; …Spain 1%

Source: IATA

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CompetitivenessoftheIndustryIn the World Economic Forum competitiveness ranking, Uruguay occupies the 73stpositionoutofatotalof141countriesanalyzedintermsofthecompetitivenessoftheirtravel and tourism industries in 2015. An examination of the individual indicatorsreveals that Uruguay still has room to work on improving the country’s connectivityconditions,particularlyintheareaofthequalityofitsdomestictransportnetworkandofitsairtransportinfrastructure.




Specificindicators(scorerange)PrioritizationbythegovernmentoftheindustryEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetworkVisarequirementsOpennessofbilateralserviceagreements(ASAs)

Source:WEF

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SWOTAnalysis–Uruguay’sConnectivity

Strengths

Socio‐economicstability

Centresoftouristattraction

Economic investment centres; third ranking country in the regionwith themost foreign investment favouring the creation of newairlines.(SourceGob.UY)

DesignationofMontevideo’sCarrascoInternationalAirportasaFreeZoneAirport.Cargodoesnotrequireformalitiesorpermits.

4cargoaircarriersoperateoutofCarrascoairport.

Governmentpolicyfavouringtheestablishmentofmaintenanceshops,(23)withplanstoattracttheregion’sairlines.

NationalandregionaloperationsofAlasUruguayandAmaszonasUruguay.

AeronauticalTrainingInstitute(IAA)forcommercialandprivatepilotsandaircontrollers.

Facilitationandrapidityofimmigrationformalitieswithup‐to‐date“EasyAirport”biometrictechnologyforUruguayancitizens.

AlasUruguay,SkyAirline,Azul,andAmaszonasUruguayhaveannouncedanincreaseinthenumberofflightsintheiroperationsandpossiblesharedcodeagreementstodevelopconnectivitywithintheSAMRegion.

Opportunities



Tradeglobalization.

InterestofforeignairlinesincreatingnewnationalairlinesineachState.

API(AdvancedPassengerInformation)technologyforimmigrationformalitiesusingsecure,encryptedelectronictransmissionswithagreatercapacityforhousingpassengerdata.

Industrytechnologythatfacilitiesandsimplifiespassengercheck‐inandembarkation,withrapidimmigrationformalitiesandsecuritycontrolprocesses. DRAFT

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Partnershipsandagreementswiththeregion’sairlines(codesharing)

Agreementsandintegrationwithoneormoreoftheregion’sStatestoattracttourismfromdistantcountries.

Weaknesses

Airportcheck‐in,security,immigrationandembarkationprocessesrequiremoreautomation.

Governmentpolicyofgreateropennesstoaviation.

TheWorldTradeOrganization(WTO)grantedUruguayanAirLiberalizationIndexof10.47(2013)onascaleof0‐50(thehighertheindex,thegreatertheliberalization).

Bilateralandmultilateralairservicesagreements(ASAs)continuetooperatewithinanenvironmentofregulatoryprotectionismonthepartof theStatesorofoneof thesignatoryStates, thathasnotbeenbrought into linewith thenewmarket conditionsandcurrentglobalizationfavouringAirLiberalization.

Threats

Unforeseeableterroristactshaveanimpactonthesecurityoftheindustry.





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4.14 VenezuelaGeneralDescriptionWith a huge wealth of natural resources and the world’s largest proven oil reserves,Venezuelaisamegadiversecountrywithapopulationestimatedat31millionandatotalGDPofUS$240billion.ItspercapitaGDP(US$7.7thousand)placesittheWorldBank’scategoryof“uppermiddle‐income”economies.Itboasts3ofUNESCO’srecognizedWorldHeritage sites (1 natural and 2 cultural) and its geographic locationwithin the regionpositionsitfavourablyasapointofaccesstoothercountries.



GDP(2015)US$billionGDPGrowth2010‐2015AverageannualPercapitaGDP(2015)US$percapitaPopulation(2015)millionUnemploymentrate(2014)Inflation(2015)Internationaltrade(2013)%ofGDPSpendingontourism(2013)US$billionTravelandtourism(%ofGDP)WEF2015Report

Source: IMF, WB and WEF. Latest available data

EvolutionoftotalandpercapitaGDPBillionsofbolivars‐GDP‐PercapitaGDPThousandsofbolivars

Venezuela’s economy is highly dependent upon its oil revenues (96% of its exports,accordingtotheWorldBank).Formanyyears,thecountrybenefittedfromhighoilpricesthat covered the fiscal spending on different social and development programmes. Anumberofcompaniesoperating indifferentsectorswerenationalizedand investmentswere made in social programmes in order to redistribute the resources to favourexcludedpopulationgroups.Unfortunately,thedropinoilpricesexertedaheavytollonthe country’s economic performance, with the result that today the country is in thethroesofaneconomicrecessionandislackinginsomebasicresources.

According to the latest information available from theWorldBank, in 2013VenezuelaexportedatotalofUS$92billion,constituting25%ofitsGDPanditsinternationaltrade(exports+imports)wasequivalentto54%ofitsGDP.Atthesametime,atotalofUS$5billionwasspentontourismin2013.Therewere986thousandinboundtouristsatthattime,whileoutboundtouriststotalled1.9million.

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AirConnectivityCharts 4.14.3 – Main air industry figures OperationalData–AviationIndustry2015

NumberofairportsAirlineswithdirectroutes(Sept2016)Numberofinternationalroutes*NumberofcountriesofdirectdestinationNumberofpassengersmillionDomesticmillionInternationalmillionNumberofflightsthousandSAMRegion(%ofinternationaltraffic)*Includesdirectrouteswithorwithoutstops


VenezuelaAirlinePassengersin2015%share

…Others…Source:IATA

MapofVenezuela’sdomesticconnectivity

COLOMBIA

VENEZUELA

GUYANA

BRASIL

ECUADOR

PERU

PANAMA

Venezuela has a total of 26 operating airports, of which, according to ICAO, 11 areinternational.TheMaiquetíaSimónBolívarInternationalAirport(CCS)inthecapitalcity

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handlesover50%ofthetotalpassengerairtraffic.Since2013,thenumberofpassengerstransportedhas dropped almost 30%. In 2015, a total of 9.7millionpassengersweretransportedtointernationalanddomesticdestinations,down‐14.8%fromthepreviousyear’s figure. Since 2013, the total number of passengers transported has dropped byalmost30%.Insofar asavailable seating is concerned, in2015, the routes flown to/fromand insideVenezuelahadanavailablecapacityof13.2millionseats,which,comparedwiththetotalnumberofpassengerswhoarrivedinordepartedfromVenezueladirectlyorindirectly(9.7million),revealedanoccupancyrateofapproximately73%.

Charts 4.14.4 – Evolution in number of passengers, flights and available seating

EvolutioninthenumberofpassengersandflightsAvailableseatsandnumberofflightstoprincipaldestinationsin2015Millions‐Passengersoninternationalflights Thousandsofavailableseatsflights‐Passengersondomesticflights U.S.;…Spain;…Brazil

Source:IATA

IATA records reveal that in2015a total of 27 commercial airlinesoperated scheduleddirect and indirect flights from/to and inside the country, with 84% of the trafficcorrespondingtodirectroutesorrouteswithimmediateconnections.Furthermore,41%ofthetrafficconsistedofinternationalflightsand59%ofdomesticflights.Atotalof32%oftheinternationaltrafficto/fromVenezuelaistotheSAMRegion.Intermsofcountriesof destination, 25 countries were directly connected with Venezuela, with or withoutstops,over60internationalroutes.IntheSAMRegion,Venezuelawasdirectlyconnectedwithout stops with 62% of the States: Argentina, Brazil, Colombia, Ecuador, Panama,Peru,ChileandGuyana(thelatter2ceasedtooperatein2016,bringingthatpercentagedownto46%).Charts 4.14.5 – Main countries connected with Venezuela

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Maindestinations/originsofdirectandindirect Main countries with direct routes to VenezuelaroutestoVenezuelaThousandsofpassengers ThousandsofpassengersU.S.;…Spain;…Dom.Rep. U.S.;…Spain;…Dom.Rep.Source:IATA

Outofitstotalinternationalairtraffic(directandindirect),theUnitedStates,ArubaandPanamaare the countrieswith themost connectivitywithVenezuelaandaccounted in2015 for over 45% of the total passenger air traffic (22.3%, 12.8% and 10.6%,respectively).Concentrationonthedirectroutesonlyrevealsthatthesame3countriesrepresentedthemostimportantroutesandtogetherwereresponsibleforalmost50%ofthetotaltrafficoverdirectroutesin2015(18.5%,18.0%and13.1%,respectively).The main airlines with direct and indirect routes inside and outside Venezuela areCONVIASAwithashareof16.8%, followedbyAsercaAirlineswith16.3%,and in thirdplaceLASERwith15.0%.Figure4.14.1–MapofVenezuela’spassengerairtransportconnectivitywiththeworld

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CANADA

ALEMANIA

ITALIA

MEXICO

R. DOMINICANA

CHILE

EEUU

PERU

CURACAO

ECUADOR

ARGENTINA

COSTA RICANICARAGUA

COLOMBIA GUYANA

CUBA

ARUBA

PORTUGAL ESPAÑA

FRANCIA

PANAMA

BRASIL

TRINIDAD Y TOBAGOGRENADA

VENEZUELA

Source:IATA.Includesdestinationsrecentlysuspendedthatwereoperatingin2015.Preparation:In‐houseThemapaboveshowsallofVenezuela’sdirectrouteswiththeworld.Inordertobeabletooperatethoseroutes,airlinesrequireoperatinglicensesbetweenthepointsoforiginandofdestination fordirect flights,withorwithout stops. Directnon‐stoproutesareshowninblueanddirectrouteswithstops,inred.AnnexAlistsallofthedirectnon‐stoproutesbyairport.AirCargo

There is very little up‐to‐date official information about the transport of air cargoto/from Venezuela. Furthermore, the country is not involved in IATA’s CASS (CargoAccountsSettlementSystems)programme.

CompetitivenessoftheIndustryIn theWorld Economic Forum competitiveness ranking, Venezuela occupies the 110thpositionoutofatotalof141countriesanalyzedintermsofthecompetitivenessoftheirtravelandtourismindustriesin2015. Acloserlookattheindividualindicatorsrevealsthat the quality of its air transport infrastructure and the condition of its domestictransportnetworkaresomeofthecountry’smainobstacles,inadditiontoitsrankingatthe lowest levels in comparison with the rest of the world insofar as its policy forprioritizationoftheindustryandtheattractionoftouristsisconcerned.

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Specificindicators(scorerange)PrioritizationbythegovernmentoftheindustryEffectivenessofmarketingandbrandingtoattracttouristsNumberofregionaltradeagreementsinforceTouristserviceinfrastructurequalityAirtransportinfrastructurequalityQualityofthedomestictransportnetworkVisarequirementsOpennessofbilateralserviceagreements(ASAs)Airfaretickettaxesandairportcharges

Source:WEF

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SWOTAnalysis–Venezuela’sConnectivity

Strengths

Privilegedgeographiclocation;forseveraldecades,commercialaviationplanneditsoperationswithconnectionsviaCaracasto/fromSouthAmericatotherestoftheworld.

Centres of tourist attraction on the coast and in the jungle, together with significant biodiversity for ecotourism supported by amarketingplanthathasproducedpositiveresults.

Nationalaviationhastakenoffoverthepastdecadewiththeestablishmentof12airlinesthathavebeenoperatingdomesticallyandonsomeinternationalroutesinAmericaandtoothercontinents.

AVIORairlineisplanningnewflightroutesandoperationstotheSAMRegion.

ConviasaisthenationalairlinethatfliestoMadridandpermitsthepurchaseofairticketsinbolivars.

Opportunities



Tradeglobalization,developmentofaircargoexports.

Opennesstothedevelopmentofaviationwithintheongoingglobalizationprocess.

API(AdvancedPassengerInformation)technologyforimmigrationformalitiesusingsecure,encryptedelectronictransmissionswithagreatercapacityforhousingpassengerdata.

Industrytechnologytofacilitate,simplifyandenhancetheefficiencyofairportcheck‐in,immigrationformalitiesandsecuritycontrolprocesses.

Fleetupdating.

Modernizationofthecustomsorganizationandprocedures.

AgreementsandintegrationwithoneormoreStatesintheregiontoattracttourismfromdistantcountries.

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Weaknesses

Regulationsgoverningairlineremittancesabroadhavenegativelyimpactedontheprofitabilityoftheoperationsto/fromVenezuelaandforthatreasonseveralairlineshavesuspendedtheirflightsuntilthesituationissettled.ThecontributionofcommercialaviationtoVenezuela’ssocio‐economicdevelopmentisimpairedatthepresenttime.

Internationalairlineflightscontinuetobereducedandareestimatedtodropto40%in2016.

Reactive,ratherthanproactivemanagementinthedevelopmentofinfrastructure

Airfare tickets are subject to the payment of VAT, airport charges, taxes for bio‐security, INACCivil Aviation, and taxes on luxuryproducts.

Airportmasterplanshavenotbeenupdatedtoreflecttheimplementationofmoreefficientinfrastructure.


LocationoftheMaiquetíaairportandsecuritythreatsonthehighwaytothecity.

Bilateralandmultilateralairservicesagreements(ASAs)continuetooperatewithinanenvironmentofregulatoryprotectionismandhavenotbeenbroughtintolinewiththenewmarketconditionsandcharacteristicsoftheongoingglobalizationprocess.

Nationalaircraftrequireconstantmaintenanceandsparepartsthatarepricedinforeigncurrency.

Threats





Citizeninsecuritythreatenspassengerassetsandsecurityandhasanegativeimpactontraffictotheterritory.


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5 VisionofAviationIndustryconnectivitydevelopmentat20355.10 SAMRegionairconnectivityoptimizationapproach

The plan for sustained air transport growth in the SAM Region considers theoptimization of the air connectivity network as a key element for the region’sdevelopment,togetherwithairnavigation,securityandenvironmentalprotectionplans.As stated in the first chapter of this module, appropriate connectivity developmentdepends as much on quantitative (number of direct routes, target market size andfrequencies) as on qualitative factors (embarkation/disembarkation processes,developmentofairnavigationsystems,controlsandconnectiontimes).In recent years, the SAM region has witnessed the consolidation of its main airlinegroups through a series ofmergers, acquisitions and commercial partnerships carriedouttoexpandtheirairtransportofferingandstrengthenoperationswithintheregion.Whilethisisindicativeoftheirvisionandtrustinthepotentialforairtransportgrowthin the SAM Region, the steady and long‐term expansion of that network will dependuponthejointcapacityofallaeronauticalstakeholdersformeetingpassengerandcargosupplyanddemandprojections.Advancingconnectivity in theregiondoesnotdependmerelyonpromotinggrowthofthe demand for passenger/cargo transport and of the capacity for supplying the airtransport(numberofroutes,flightsandfrequenciesofferedbyaircarriers)tomeetthatdemand. Work will also be necessary on three fronts to develop and increaseconnectivity:

(iv) RegulatoryliberalizationAeronauticalregulationisacoreelementfordefiningthescopeofactionofaircarriers.ThemoreopentheskiesofaState,thegreatertheopportunityformakingthemostofitstourism and trade potential and the probability of opening new routes and of thepresence of different operators, helping to build a competitive environment that willbenefitallconsumers.SomeofthemainobstaclesthatcouldlimitaState’sconnectivityofferingare,amongothers:restrictionsonaircarrierownership,numberofroutesandaccesstosecondaryairports,andimpositionofsurchargesortaxesonairfareticketsandofvisarequirements.(v) InfrastructureexpansionandmodernizationAircarrierscannotopenmoreroutesorincreaseflightfrequenciestosatisfyagrowingdemand forconnectivityunless infrastructure isavailable toaccommodate thegreaterairtrafficflows.Therearetwowaystoexpandinfrastructurecapacity:1)byincreasingthenumberandphysicalsizeofterminals,runways,boardinggates,andaircraftparkingareas, amongother things; and/or2) investing innew technology thatwouldmake itpossible to use existing infrastructure, butwould speed up air trafficmanagement tosave time and/or permit operations not previously possible using the old technology.For example, inadequate aviation infrastructure can create obstacles to increasedconnectivity by causing aircraft congestion, leading to delays and inefficient flightschedulesandaddingtothetimepassengersandcargomustspendontheirtrip,which,intheend,createsindirectcostsintermsofpeople’sbusinessopportunities,well‐beingand social development. The PBN (Performance‐Based Navigation) programme andRNAV/RNPsystemsadoptedby thePeruvianState foroperationsat theCuscoairport

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havemadeitpossibletoextendtheauthorizedflightoperationperiodfromnolaterthan2 p.m. every day to the entire day and up until 8 p.m. for aircraft certified for thisapproach,landingandtake‐offprocedure.(vi) ProcessefficiencyAs stated previously in this connectivitymodule, the flow of the procedures towhichpassengersandcargomustsubmitinordertobetransportedfromonepointtoanotheraffects the quality of the connectivity offered by a State. Simpler and more rapidinformationtechnologyprocedureswithfewerbottleneckscontributetoanorderlyandwell‐managedtrafficflow,givingroomtoaccommodatealargersupplyanddemandforflights.Suchproceduresincludeallpassengerandcargoserviceslikecheck‐in,security,baggagehandling,customs,embarkationanddisembarkation.Figure 5.1.1 – Air connectivity development fronts

Preparation:In‐house AirTransportSupplyandDemand‐Regulation‐Infrastructure‐ProcessesResponsibility for acting on those fronts lies above all with all aviation industrystakeholders: States, airlines, air navigation system providers and airports, whichmust work in coordination with each other for the industry’s best possibledevelopment. Sustainablegrowthofair connectivityat2035willdepend largelyontheefficiencywithwhichthefollowingactionsaretakenbyeachofthestakeholdersinvolved:

States:Aspartoftheirregulatory,supervisoryandcontrolresponsibilities,State

agenciesrequire that thenecessarymeasuresbe takentooptimize thecapacityandoperationofairportsandairnavigationsystems. Theirmainobjectiveistooptimizeuseoftheinstalledcapacityandenhanceseamlessoperationinordertoallowforanincreaseinthetrafficflowandensure,togetherwiththerestofthestakeholdersinvolved,thesafetyofairoperations.At the same time, each country’s air traffic rules and regulations (bilateralagreements, airoperation standards, consumerprotection, etc.)haveadecisive

Air transport supply anddemanddeterminethepotentiallevelofconnectivity

That level cannot be reachedmosteffectivelywithoutsupportfrom the 3 fronts forconnectivity development:regulation, infrastructure andprocesses

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impactonthedecisionandcapacityofnewaircarrierstoenteramarketandonthe opening of new flight routes and destinations and the increase in flightfrequencies.ThePeruvianStatetriedoutaninterestingstrategyduringthe2013World Routes fair by approaching a group of airlines that was showing thestrongest interest in opening new international routes (Lufthansa, Alitalia, andTurkishAirlines, amongothers),22inorder topromote thecountry’sattractionsandexplainitsairtrafficregulationsandthefacilitiesoffered.

Commercial airlines: evaluate the possibilities for expansion bymaking a cost‐

benefit analysis of their aviation operations and services in the region.Furthermore,onstartingup,theyalsogenerateasupplyandpromoteademandby opening up new routes at competitive fares, in order to boost traffic in aninitial stage. Shared code agreements are another interesting strategy thatcontributes to greater connectivity, under which two ormore air carriers jointogethertoopennew,cost‐efficientroutes.Bywayofexample,LATAMBrasilandCathayPacific signeda sharedcodeagreement thisyear todevelopmore flightconnectionsbetweenSouthAmericaandAsia(AirLatinNews,11October2016).

Airports: managed by States or under private concession agreements, shouldinclude in their operating plans the necessary action to be taken and priorityinvestments to bemade to accommodate the expected increase in demand forairline traffic, particularly during peak hours when the provision of airportservicestousersiskeyforoptimizingadequateconnectivity.

WhenaStateundergoesastageofair trafficgrowth,ACC(AirportConsultativeCommittee) meetings are called, coordinated by IATA with its airports and inwhichairlinesparticipate.TheStateandproviders involved inACCmattersareconvened so that the airport expansion plans and problems identified byoperatorscanbepresented.Thepurposeofthesemeetingsistomovetowardaconsensus for appropriate ground infrastructure development. Most airportsalso hold regular meetings one‐on‐one with the main air operators to collectinformation about their short‐term business plans and determine the need forbetterplanning.Toconclude,regularconsultationofthemanualspreparedbyICAOandIATAinkeeping with international standards on, among other things, economic andtechnical matters and efficient operation, is important. ICAO has published anumber of documents like its “Airport EconomicsManual” and “Manual on AirNavigationServicesEconomics,”whichprovideguidance toStates, airportsandairnavigationservicesprovidersonmoreefficientmanagement. IATA’sAirportDevelopment ReferenceManual (prepared jointlywith ACI) is also a referencetoolforimprovingairportmanagementofpassengerandcargotraffic,operationsandservicesoffered,inordertooptimizeairtrafficflowandmakethemostoftheconnectivityofeachoftheStatesintheregion.

Tosumup,inordertomaximizeairconnectivityintheSAMRegion,it isnecessaryforStates, airport concession holders, airlines and air navigation system providers tocoordinateinmakingdecisionsandimplementingplansforappropriateoperationofthe

22“CompetitividaddelaaviaciónenAméricaLatinayposicionamientoPerúyanálisisdemercado”(AviationcompetitivenessinLatinAmericaandPeru’spositioningandmarketanalysis)–ALGyT&L(commissionedbyMincetur)

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current connectivity network and in taking advantage of existing possibilities for itsexpansion. Only in thiswaycan theultimatepurposeofexpediting theeconomicandsocialdevelopmentoftheregion’s14countriesbeachieved.

5.11 MainfiguresandcharacteristicsofairlinetrafficintheSAMRegionOverall,theSAMRegion,accordingtoIATA,hasatotalof328operatingairportswithinits 14 States thathandledomestic and international flights. Of these, ICAOplaces thenumberofinternationalairportsat106. Thetotalpassengerflowtransportedto/fromand inside theregion in2015,according todatasuppliedby IATA, reacheda figureof198.4million(seeAnnexB fordatabrokendownbyState). This isbarely1.2%morethanthepreviousyear,duemainlytothereductioninBrazilian(‐2.6%)andVenezuelanpassengertraffic(‐14.8%). Charts 5.2.1 – Evolution of air traffic in the SAM Region

Evolutioninthenumberofpassengers AnnualgrowthintrafficbyState,2015vs.2014Millions‐Internationalpassengers‐Domesticpassengers Peru…Panama…FrenchGuianaSAMRegion…BrazilSurinameSource:IATAandTocumenInternationalAirport.Preparation:In‐house

It should be added here, however, that air traffic growth in the region in past yearssurpassed7%(exceptin2014,whenitdroppedto3.2%),placingaverageannualgrowthfor2010‐2015at7.2%. During thatperiod,Panama,Peru,Bolivia,ColombiaandChilespearheadedthegrowthofairtrafficintheregionwithaverageannualratesover2010‐2015of13.9%,12.2%,11.1%,9.8%and8.2%,respectively. Atthesametime,Brazil,Colombia,ArgentinaandPeruarethecountrieswiththemostpassenger traffic, accounting in 2015 for over 75% of the total. Brazil alone isresponsiblefor46%ofthetotal.Charts 5.2.2 – Composition and annual growth of passenger air traffic by State

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Averageannualgrowthintraffic,byState2010‐2015 TrafficdistributionintheSAMRegion,byState

Peru;…SAMRegion;Brazil;…Suriname;…FrenchGuiana Brazil44%;…Peru7%;…Panama6%;…Others4%

Source:IATAandTocumenInternationalAirport.Preparation:In‐house

In terms of flight destinations, 70% of the air traffic in the SAM Region consists ofdomestic flights within each of the 14 States. The remaining 30% corresponds tointernationalflights,ofwhich7%wereintra‐regionalbetweenStatesintheSAMRegion.Asaresult,77%ofthetotalairtrafficconsistsofdomesticandinternationalpassengertrafficwithintheSAMRegion.While intra‐regional traffic varies State‐by‐State, it should be stated that 11 of the 14Statesareresponsibleformorethan30%oftheinternationaltrafficwiththerestofthecountries in theSAMRegion. That indicatormeasureseachState’s total trafficand itspercentageoftotaltripswithintheregion‐‐inotherwords,itgivesarelativeideaoftheimportanceof theSAMRegionwithineach country’s international traffic. As a result,althoughBrazilandArgentinaarethecountrieswiththelargestnumberofpassengers,in absolute terms, travelling within the region (approximately 5.8million passengerseach), Paraguay and Uruguay, in terms of total traffic, receive a larger percentage ofvisitorsandmake tripswithin theSAMRegion‐‐inotherwords, theirpassenger trafficdependsheavilyupontheir tourismandbusinessrelationswithothercountries in theSAMRegion.Charts 5.2.3 – Distribution of air traffic and importance of intra-regional traffic DRAFT

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ImportanceoftheSAMRegionwithineachState’s DistributionoftheSAMRegion’sairtraffic,byinternationalairtraffic(%share) destinationParaguay;…FrenchGuiana Domestic67%;International26%;SAMRegion7%;[77%ofthetraffic

correspondstodomesticandinternationaltrafficwithintheSAMRegion]Source:IATA.Preparation:In‐house

Map 5.2.1 – Countries of destination connected via direct routes with the SAM Region

Source:IATA

A totalof67countrieshavedirectconnectionswith theSAMRegion(including its14memberStates)via773internationalroutes,ofwhich519aredirectnon‐stoproutes(atotalof52countrieswithnon‐stopconnections).

Asfortheairoperators,belowisasummarytablebrokendownbyState,showingthemost important SAM Region and international operators and differentiating betweenconventionalandlow‐costcarriers.

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Table 5.2.1 - Main airlines with a direct presence in the SAM Region (Source: IATA)

Region

World

Low-cost

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5.12 TheSAMRegion’scurrentlevelofconnectivity

5.12.1 MetricsoftheSAMRegion’sconnectivitylevelThe purpose of this document is to assess andmeasure the connectivity of the SAMRegioninordertogiveanideaofthedegreeofitsdevelopmentandbeabletofollowuponitsevolution.BelowareaseriesofcomparativemetricsfortheconnectivitylevelofeachStateintheSAMRegion:AirportdensityAirportdensitymeasuresthetotalnumberofairportsperonemillioninhabitantsandisan indicator of the level of availability of air traffic infrastructure to a country’spopulation. That metric is presented below measured in terms of total airports(domesticandinternational)andthenofinternationalairportsexclusively.Charts 5.3.1 – Airport density by State

Totalairportdensity(NumberofairportsperState/one Internationalairportdensity(Numberofmillioninhabitants)internationalairportsperState/onemillioninhabitants)…FrenchGuiana… …FrenchGuiana…Source:IATA,ICAO(CAR/SAMAirNavigationPlan).Preparation:In‐house

It isobviousthatPanamaleadstherankingwitharatioof4.5airportsperonemillioninhabitants in the caseof total airportsandof1.5 in thatof international airportsperonemillion inhabitants. The second and third places vary according to the indicatorused.ThisisexemplifiedinthecasesofBoliviaandColombia,which,althoughtheyhavealargernumberoftotalairportsavailableperinhabitant,ranklowerwithintherestofthe region in the specific case of international airports. That situation reflects thecentralized distribution of international air traffic within those countries among asmallernumberofairports(onlyabout20%of their totalairportsare international inthe case of both countries). Chile is a case apart, showing a sizeable improvement inposition vis‐à‐vis the rest of the region’s countries, for50%of its airports canhandleinternationaltraffic.Brazil, for its part, although the most connected country in terms of number ofpassengers,airlinesandairports,stillshowsampleroomforfurtherdecentralizationofits air traffic, given its large land area andpopulation.AlthoughSaoPaulo andRio deJaneiroarehighlyconnected,citieslikethecapital,Brasilia,donotshowthesamelevel

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ofconnectivityandaccountforlessthan7%ofthetotalairtraffic.Thecountry’sbroadconnectivity offeringdoes not reach all of its inhabitants, a fact that is reflected in itsinternationalairportdensitymetric,whichisamongtheregion’slowest.NumberofflightspercapitaTheindicatorofthenumberofflightsdividedamongaState’stotalpopulationgivesanidea of the people’s tendency to travel and possibilities for doing so. A nominalcomparisonof thenumberof flightsamongdifferentStates is a frequently inadequateindicator, for it fails to consider the size and purchasing power of each country’spopulation. The number of flights per capita indicator does give an idea of thepopulation’s purchasing power and degree of development when combined with theoffered degree of available air connectivity. The higher the metric, the greater theconnectivity.Charts 5.2.5 – Number of flights per capita

Numberofflightspercapita,byState Numberofflightspercapita,byregion(flightsper1,000inhabitants) (flightsper1,000inhabitants)….FrenchGuiana… NorthAmerica;EuropeandCentralAsia;SAM

Region;EastAsiaandthePacific;MiddleEastandNorthAfrica;Africa;SouthAsia

Source:IATA,WorldBank.Prepared:In‐house

Panamais thecountrywiththe largestnumberof flights in termsof itspopulation. Itstands farapart fromtherestof thecountriesmainly for tworeasons:1)Although itspopulationisrelativelysmallincomparisonwiththoseofothercountriesintheregion,it is one of the countries with the largest number of routes and flights; and 2) Inoperating as a hub for the region, it accommodates a large percentage of in‐transitpassengers (approximately 60% of its total passengers). Regionally speaking, theaveragenumberofflightspercapitaintheSAMRegion,foritspart,issimilartothoseoftheMiddleEast,NorthAfrica,EastAsiaand thePacific,but lower than thoseofNorthAmericaandEurope,stillgivingitsizeableroomfordevelopment.Routes,destinationsandoperatorsThenumberofdirectinternationalroutesmeasureshowmanyairportseachcountryisconnected with at the global level. The larger the number of direct routes a Statepossesses,thegreater itsconnectivitywiththeworld’saviationnetwork. Thosedirect

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routesowetheirexistencetobilateralagreementsbetweenthecountriesoneachroute‐‐in other words, an operating license is needed to be able to embark and disembarkpassengers between all pairs of interconnected cities. Furthermore, the decision tooperateadirectroute,whethernon‐stopornot,willalsodependuponthepreferenceofthe consumers and the analysismadeof its commercial feasibility andprofitability byeachauthorizedairline.Charts 5.2.6 – Direct international routes

Numberofdirectinternationalroutes Countries of destination with direct routes,byState‐Non‐stoproutes‐Routeswithstops ‐Non‐stoproutes‐Routeswithstops…FrenchGuiana …FrenchGuianaSource:IATAPreparation:In‐house

From theabove, it is clear thatBrazil andPanamaare the region’s countrieswith themost international connections. It shouldbe stressed that in Panama’s case, althoughthe number of its direct routes is slightly larger than that of Colombia, in terms ofcountries/territoriesofdestination,Panamahasconnectionsto12territoriesmorethanColombia, showing thatdespite their similarnumberofdirect routes,Panama ismorediversifiedingeographicterms,whileColombiaisprobablyinterconnectedwithseveralcitiesinthesamecountry.Toconclude,anotherwaytodetermineacountry’sdegreeofconnectivityistoanalyzethevarietyofitsdestinationsandairoperatorsbyregion.Thiswillrevealwhichregionseach State is more or less connected with, in order to be able to identify where thepossibilityexists foropeningupnewroutes. Inaddition, the interestandpresenceofforeignoperatorsisalsoanindicatorofeachcountry’sairconnectivitypotential.

Charts 5.2.7 – Countries of destination and air operators, by region

Number of destinations, by region Number of airlines, by ownership origin

-SAM Region -Rest of America -Europe -Africa -SAM Region -Rest of America -Europe -Africa -Middle Middle East and Central Asia -East Asia and the Pacific East and Central Asia -East Asia and the Pacific

…French Guiana …French Guiana

Source: IATA (data), World Bank for the classification of destinations by region. Preparation: In-house

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Brazilisseentobethecountrywiththewidestvarietyofairconnectionsandthelargestpresenceofforeignoperators,makingitfeasibletooperatethoseroutes. It istheonlycountry in the region with direct routes to countries in East Asia and the Pacific,specificallySingapore,SouthKoreaandChina.Italso(togetherwithPeru)offersdirectflightstoAfrica,withconnectionswith6countriesinthatcontinent.Forfurtherdetailsonthecitypairsandairlineoperators,byState,seeAnnexesAandC,respectively.Generally speaking, most countries in the SAM Region show great, still unexploredpotential for connections with other regions like Asia and the Pacific, Africa, EasternEuropeand theMiddleEast. Countries like India, Japan, Israel,GreeceandEgyptaresome of the world’s well‐positioned destinations that still have no direct scheduledroutes tocountries in theSAMRegion. At thesame time,countriesofgreateconomicimportance for tourism and trade, like China, Singapore, the Emirates, Qatar, SouthKorea andTurkeyhave very few routes operatingwith barely1 or2 countries in theregion, leaving considerable room for the rest of the States to consider establishingdirect connections with them. By way of example, according to Boeing23, the SAMRegioncurrentlyaccounts for less than2%of the totalair tradewith theMiddleEast,AsiaandthePacific.An analysis of the ownership origin of the airlines operatingwithin each Statewouldrevealbehaviouralongsimilarlines.ThemarketforMiddleEastern,AfricanandAsianand Pacific operators, while highly developed globally, is extremely small within theregion.Thereareairlineoperatorsthatareveryimportantworldwide,likeKoreanAir,which, for example, has approached Peru’s authorities and currently operates non‐scheduledcargoflightstoseveralcountriesintheregionandhasplanstoaddpassengerflights in the future. In addition, Japan’sAllNipponand JapanAirlines,while still nothaving revealed anyplans to enter the region, do represent a very important partnerinsofarastourismisconcerned.ElAlIsraelAirlines,HongKongAirlines,EtihadAirways,China Southern and Turkish Airlines are air carriers that, as members of IATA, haverequested information about the requirements for entering some of the region’scountries. They have also made familiarization visits to look into the possibility ofopeningofficesandparticipating in the localmarket inorder toboost thedemand forandofferingofflightsto/fromtheirrespectiveregionsoforigin.Duringtheinitialphase,those airlinesmake sales indirectly through a GSA (General SalesAgent) under inter‐

23“WorldAirCargoForecast2014‐2015”–TheBoeingCompany

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carrieragreementsuntiltheyhavefamiliarizedthemselveswiththemarketanddecidedwhetherornottheycanoperatedirectly.Itisalsoimportanttomentionthelow‐costairlinemarketthatisboomingintheregion.Itiscontributingheavilytothedevelopmentofsecondaryairportsandtheintroductionof more competitive fares that will make air travel more accessible to a largerpercentage of the population, contributing in thatway to the prosperity of a broadersegmentoftheeconomy.Inthecaseofdomesticmarkets,Brazil,andtoalesserextentChileandColombia,showevidenceof the importantpenetrationof low‐cost airlines in their respectivemarkets,withsharesestimatedat2016of57%,30%and12%,respectively24.Inthecaseofintra‐regionalinternationalflights,however,thetrafficoflow‐costairlinesisconcentratedforthemostpartinArgentina,Brazil,ChileandUruguayandhasshowngrowthofonly1%over the past 5 years (reaching an 8% share of the total traffic). As a result, it isnecessarytopromotemoreflexibleregulationsinordertostrengthenexistingoperatorsandpermit theentryofnewones inorder to furtherboost themarket’sdevelopment.Air carriers like Germany’s Cóndor Flugdienst, the United Kingdom’s Easy Jet, andSpain’sVuelingareimportantworld‐classoperatorsthatcouldbeinterestedinenteringthe region. It should be added that Ireland’s Ryanair has expressed an interest inparticipating and forming partnershipswith the region’s airlines in order to build uplow‐costdomesticandinternationalairtraffic.In short, the SAM Region still has a chance to continue increasing its regionalconnectivity and building up its domestic industries and economies. But, in order toconvincenewconventionalandlow‐costoperatorsfromdifferentregionsoftheworldtoenter the SAMmarket, it will be essential to adopt regulations that allow for greateropenness to foreign capital, accompanied by the provision of adequate infrastructurecapableofhandlingtheincreasedairtrafficinthemainairportsofeachState.

24“VivalaRevoluciónofLCCs?Notquiteyet…”–CarlosR.Ozores

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5.12.2 IndicatorsoftheconnectivitylevelandqualityintheSAMRegionThe use of economic indicators or indexes makes it possible to create differentmeasurements that give an idea of the relative magnitude of a variable underassessment. In thecaseof thisstudy,wehave focusedonananalysisof the levelandqualityof connectivity in theSAMRegion. Wehaveaccordingly createdandcollectedthe following data for its twomain fronts: passengers and cargo. The results of theanalysis,bothquantitativeandqualitative,ofthelevelofconnectivityofeachStateintheSAMRegionarepresentedbelow.

a) Passengerconnectivitylevelindex

The purpose of this indicator is to analyze the level of connectivity of a territory inaccordancewiththetotalnumberofpassengersofeachState,butweightedandtakinginto consideration the economic importance and relevance of each country ofdestinationwithwhich it is connected; this is to say that destinationswith a greatercapacityforconnectivitywiththerestoftheworldwillbeweightedmoreheavilyinthevaluation. Asaresult,thisindicatorconsidersnotonlythetotalnumberofpassengersgoing to each destination, but also that the connectivity of States connectedwith themore developed countries and hubs will bear greater weight in relative terms. ForfurtherdetailsaboutthecalculationoftheindicatorseeAnnexD.TheresultsforeachStateintheregionaresetoutbelow:Charts 5.2.8 – SAM Region passenger connectivity indexes

SAMRegionpassengerconnectivityindexDomesticandinternationalpassengersper1billionUS$ofGDP

Brazil;Panama;…Peru;…Suriname;…FrenchGuiana NorthAmerica;EuropeandCentralAsia;SAMRegion;EastAsiaandthePacific;MiddleEastandNorthAfrica;Africa;SouthernAsia

Source:IATA,WorldBank.Preparation:In‐house

Brazil is seen to be the region’s leader in connectivity at the level of air traffic,accountingfor46%ofthetotalpassengers.Itisthecountrywiththelargestnumberofinternationalairports(29)andofairlineoperators(37)and,therefore,withthelargestnumber of direct routes (189), which aremost widely diversified among the variousregionsofdestination(itistheonlycountrythatreachesAsiaandthePacificandhasasizeablenumberof routeswith theMiddleEast andAfrica). It shouldbe addedhere,however,thatthisindicatorhasbeencalculatedatthecountrylevelandthereforedoes

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notconsiderthedistributionandavailabilityofairserviceswithineachState; inotherwords,itrepresentsthetotallevelofconnectivityofthecountry’spassengersanddoesnotaccountfordifferencesinconnectivityanddistributionlevelsamongBrazil’svariouscities.Ona second levelof importanceareColombia,Argentina,PanamaandPeru, countrieswithalargepotentialfortourismandbusinessandwhoseterritoriesserveashubsforsome of the region’s most important air carrier operators. The lowest positions areoccupiedbythesmallestStatesintheregion,afactthatisnotsurprisinggiventhattheyhave fewer passengers, but also because of the smaller size of their economies andpopulations.In order to situate the SAMRegion as awhole in comparisonwithother regions, andgiven the limited availability of up‐to‐date global information,wehavemade use of asecondmetricoruseful,easilycalculated indicator, toshowtheregion’spositioning intermsofotherregionsoftheworld:numberofpassengersperonebilliondollarsofGDP(adjustedbyPurchasingPowerParityorPPP).Thatindicatorallowsustoestablishthedimensionsofeachregion’sairtrafficdependinguponthesizeofitseconomy,inordertosituatethelevelofitspassengersintermsofitsGDP.Itshouldbeaddedherethatincalculatingthat indicator,wehavedrawnondatapublishedby theWorldBankthat isbrokendownbyregion.It can be seen in the second chart to the right of 5.2.8. that North America is theundisputed leader at theworld level,with approximately45 thousandpassengersperone billion dollars of GDP. The SAM Region occupies a mid‐level position with 28.6thousand passengers per one billion dollars of GDP, above Africa, South Asia and theMiddle East, but below North America, Europe, Central Asia and East Asia and thePacific. ThatpositioningrevealsthepotentialthatstillexistsforaviationdevelopmentintheSAMRegion.b) CargoconnectivitylevelindexThe cargo connectivity level index was prepared in the same way as the passengerconnectivity level index, by considering the total number of tonnes transported forexportbyeachcountry,butweightingeachdestinationaccordingtothesizeofitsGDPand, therefore, of its global economic importance. In thatway, cargo connectivity isgivenarelativeweight inaccordancewith thebenefitsconferredon the internationaltradeof eachof the region’s territoriesby each connectionpoint. For furtherdetailsaboutthecalculation,seeAnnexD.Theresultsareasfollows:Charts 5.2.9 – SAM Region cargo connectivity indexes

SAM Region cargo connectivity index Cargo tonnes per km transported per one billion US$ of GDP

…Brazil;…Panama Middle East and North Africa; North America; South Asia; Europe and Central Asia; Africa; SAM Region; East Asia and the Pacific

Source: IATA, World Bank. No official cargo data by destination is available for Guyana, French Guiana, Suriname, Paraguay and Venezuela and for that reason no cargo connectivity indicator could be prepared for those territories. Preparation: In-house

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Colombiaisthecountrywiththelargestdegreeofcargoconnectivity.ItisalsotheStatethattradesthemostwiththeSAMRegion’sforemosttradingpartner.Chileisanothercountry that trades heavilywithmore developed and economically important States,withtheresult that its index is thesecondmost importantone intheregion.Ecuadorand Peru also show significant connectivity indexes, given their levels of trade withNorthAmericaandimportantEuropeancountrieslikeFranceandSpain.Giventhelimitedavailabilityofglobaldata,anothersimpleindicatorforevaluatingthelevelofSAMRegionaircargoconnectivityincomparisonwiththatofotherregionsoftheworldisthetonnesofcargotransportedperkilometerperUS$onebillionofGDP.That indicator was prepared usingWorld Bank data published by region. The SAMRegioncanbeseentoshowamongthelowestlevelsofairtrade,consideringthesizeofits economy, surpassingonly thoseofEastAsia and thePacific. Asnotedpreviously,SAMRegiontradeislimitedforthemostpartto3regions(NorthandCentralAmerica,theSAMRegionitselfandEurope).Thatsituationisindicativeofmajor,yetunexplored,opportunitiesthatcouldresultingreateconomicbenefitsfortheStates.

c) Indicatorsofpassengerandcargoconnectivityquality

This section presents indicators prepared by the World Economic Forum (WEF) inregardtothequalityofpassengerandcargoairconnectivity.Theindexesandrankingsweredevelopedbyanalyzingvariousdifferentcharacteristicsofthesector,whiletakingintoconsiderationtheopinionsandknowledgeofgovernments,organizations,businesspeopleandtopaviationindustryenterprises.AviationInfrastructurequalityThecapacityandconditionofitsairtransportinfrastructureisoneofthekeyvariablesfordeterminingthequalityofaterritory’sconnectivity.Asstatedinprevioussectionsofthis module, WEF, as part of its “Report on the Competitiveness of the Travel andTourismIndustry,”makesananalysisofairtransportinfrastructure,byState.ThechartbelowshowsthedifferentfactorsinvolvedinsettingavalueonthatindicatorandeachState’sresultingrankingintermsofit:

Diagram and Table 5.2.9 – Factors included and WEF ranking of air transport infrastructure quality

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Airtransportinfrastructurequality

Airtransportinfrastructurequality Country:Panama;Brazil;…Peru;Suriname;ScoreRanking‐Weeklyseatavailability;‐Numberofflights;‐Qualityofairportsandtheirpassengerservices;‐Airportdensity,bypopulation;‐Numberofairoperators

*TheReportdoesnotincludeFrenchGuianaandEcuadorwithinitssamplingofterritories.Source:WEFPreparation:In‐house

Panamaleadstherankingandoccupiesthe18thpositionattheworldleveland,togetherwithBrazil andGuyana, is among the top50 economies studied. Theother countriesrankfrommid‐levelondown,revealingthatmuchstillneedstobedoneintheregiontoimprove air transport infrastructure quality and expand its capacity. Countries likeColombia,PeruandArgentina,despiteenjoyingahighlevelofconnectivity,mustinvestfurther inupgrading their infrastructure if they intend to takemaximumadvantageoftheirpotentialforconnectivity.LevelofInternationalOpennessAnotherimportantindicatorusedfortheanalysisincludedinthatreportisthelevelofinternational openness of States in the SAM Region. The factors considered in theanalysisandrankingofresultsforeachStateintheSAMRegionareshownbelow:

Diagram and table 5.2.10 – Infrastructure quality and international openness indexes

Levelofinternationalopenness

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LevelofInternationalOpenness: Country:…Peru;Panama;…Brazil;…SurinameScoreRanking‐Requiredprocessesandvisas;‐DegreeofASAliberalization;‐Regionalagreementsinforce*TheReportdoesnotincludeFrenchGuianaandEcuadorwithinitssamplingofterritories.Source:WEF.Preparation:In‐house

AccordingtoWEF,Chileisoneoftheeconomiesmostopentotheinternationalmarket,occupying the 2nd position at the global level for that indicator. Colombia also ranksamong the top10worldwide(8thposition).Attentionshouldbedrawn,aswell, to thecases of Peru, Panama and Guyana, which show a relative degree of openness incomparisonwith theworld’sother countries, occupyingpositions15,23and51. Theothereconomies,comparedwiththerestoftheworld,showevidenceofinflexibilityandheavy regulation that limit or obstruct opportunities for maximizing their territories’connectivity.FacilitationofinternationaltradeTheWorld Economic Forum, exclusively in terms of air cargo, regularly updates “TheGlobal Enabling Trade Report,” inwhich itmakes a detailed analysis of the level andquality of infrastructure, policy, institutions and services for facilitating world trade.The latest reportwaspublished for2014and includes anevaluationof138 countriesthataccountfor98.8%oftheworld’stotalGDPand98.3%ofitstotaltradeingoods.One of the most important indicators found in that report, which we will use forreferencepurposes inevaluatingthe levelof trade facilitationandconnectivityqualityfor cargo transport in the SAMRegion, is the level of border administrationefficiencyandtransparency.AlthoughthereportpreparedbyWEFisnotlimitedexclusivelytoaircargo, we consider that the evaluation of the general state of a territory’s borderadministrationisapplicabletoallmeansoftransport.It should be stressed that this indicator is extremely important in terms of tradeconnectivity, for if a country wishes to export/import products to/from anotherterritory, it must first evaluate the cost and available options for transporting thosegoods. This will involve considering the quality and capacity of the air transportinfrastructure at the places of origin and destination. Therefore, although the airtransport infrastructurewill determine just howmuch cargo canbe transported fromone territory to another, a further important element a companymust consider in itsdecision of whether or not to export/import is the level of complexity and costs ofcustoms formalities and other services in the foreign territory. Inefficiency in themanagementof thoseserviceswilldiscourage theexport/importofgoods to/fromthecountryinquestion.TheWEFindicatoroftheefficiencyandtransparencyofborderadministrationincludesaseriesoffactorsthatareenumeratedbelow,togetherwithasummaryofthatindicator,brokendownbycountry:

Diagram and table 5.2.2 – Indicator of the level of border administration efficiency and transparency

Border administration efficiency and transparency Border efficiency and transparency

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-Customs services -Efficiency of customs clearance -Number Country: …Peru; Panama; …Brazil Score Ranking of days required to import/export -Number of documents required -Cost per container -Predictability of time periods -Transparency of the processes -Presence of irregular payments

Eficienciaytransparenciadefronteras

*The Report does not include French Guiana and Suriname among its sampling ofterritories.Source:WEF.Preparation:In‐house

To sum up, the connectivity level and quality of States in the SAM Region varies inaccordancewiththeopenness,capacityandefficiencyoftheirprocesses.TheRegionasawholeranksgloballyatthemid‐level,leavingroomforimprovement.Inordertotakeadvantageoftheregion’spotentialforgrowthanddevelopment,workmustbedonesimultaneouslyonthreefacilitationfronts:(i)regulatoryliberalization,(ii)capacityanduptodatenessofinfrastructurequality,and(iii)processefficiency(for furtherdetailsaboutthe importanceofthosefrontsforconnectivity,see2.4“What factors determine a country’s degree of connectivity?”) However, asmentionedearlier,theeffortmustbeajointoneamongallstakeholdersinvolved(State,aircarriers,airportconcessionholdersandprovidersofairnavigationservices);onlyinthatwaycananeffectivestrategybecoordinatedtoproducesustainableresults inthelongterm.5.13 Projectedpassengerandcargotrafficat2035International organizations like theWorldBank and the InternationalMonetary FundforeseethatoverthenextfewyearscountriesintheSAMRegionwillcontinuetofollowarisingtrendofannualgrowthfigurestoppingtheworldaverage(3.5%).Itisexpectedthat the currenteconomic slowdownof someof themost importantStates likeBrazil,Venezuela andArgentina, duemainly to the drop in oil prices and the effects of theirdomesticpoliticalsituation,willbeshort‐lived(untilthecloseof2017),tobefollowedbytheirrecoveryandareturntomorepromisingGDPgrowthratesonaparwiththoseoftherestofthecountriesintheregion.

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Giventhatassumption,thetopaviationindustryorganizationsandstakeholdersforeseecontinuousgrowthof thepassengerandcargo industryofbetweenapproximately4%and6%perannumoverthenext20years(table5.3.1.). Itshouldbeaddedthat theseregional projections are not limited to South America and take in all of the LatinAmericanandCaribbeanterritories.

Table 5.3.1 –Averageannualgrowthprojections

Pasajeros Carga

IATA 3.7%(2016.2035) ‐ATAG 4.7%(2014‐2034) ‐Boeing 5.8%(2015‐2035) 5.5%(2014‐2034)Airbus 4.7%(2014‐2034) 4.0%(2013‐2034)

Passengers Cargo Source: IATA, ATAG, Boeing and Airbus

PassengersThis sectionpresents IATA’sdetailedprojection specifically for theSAMRegionof thetotal number of passengers by State and at the regional level over the next 20 years(2016‐2035). That projection is part of an IATA programme conducted jointlywithTourismEconomics toprovideandupdatebiannuallyannualglobalprojectionswitha20‐yearhorizon. Themethodologyapplied fortheprojection includesbothshort‐andlong‐term factors, current economic conditions, per capita income, tendency to fly,population size, demographic changes and the expected trend in the real cost of airtransportinthefuture.AccordingtoIATA’sfigures,averageannualairtrafficgrowthisprojectedat3.9%fortheperiod 2016‐2035. Thismeans that the SAMRegion’s current traffic of 198.4millionpassengers would grow to over 43025million by 2035, or 2.2 times that of 2015. Itshould be added that theprojected growth figuresdonot take into consideration anymajorchangesintheexistingregionaltrafficstructureorintheeconomiesoftheStatesinvolved.AccordingtoAirbus,atpresent,4regions(SAMdomestic‐intraregional,NorthAmerica,Central America and Europe) are responsible for more than 90% of air traffic. As aresult, the possibility of adding further to regional connectivity and surpassing thoseexpectationswilldependuponthecapacityoftheregion(andofeachindividualState)to create new routes toward underexplored destinations and increasing the flows onalreadyexistingroutes.Furthermore,thatexpansionshouldmoveaheadhand‐in‐handwith advancing international openness and updating air transport infrastructure andprocesses.ThetablebelowsummarizestheannualprojectionsbySAMState fortheperiod2016‐2035(seeAnnexEforfurtherdetails):Table 5.3.2 – Annual growth projections, by State

25ItshouldbeaddedthatthetotalsfortheRegionconsidera6.7%adjustmentforcrosstrafficbetweenStates(accordingtothehistoricaldata),inordertokeepfromduplicatingpassengerswhoseoriginisrecordedinoneStateanddestinationinanother.

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…Brazil;…FrenchGuiana;Panama;Paraguay;Peru;Suriname;…SAMRegionCharts 5.3.2 – Evolution in the number of passengers and composition, by State

ProjectedpassengerairtrafficintheSAMRegion Distributionoftraffic,bySAMStateInthe2016‐2035period inthe2016‐2035periodMillionsofpassengers Brazil;…Panama;Peru;…OthersSource:IATA,Preparation:In‐house

BoliviaandPanamacanbeseentoleadtheregion’sgrowth,withannualratesaveraging6.1%and6.0%,respectivelyforthe2016‐2035period.Panamashowsmoreaggressivegrowthintheinitialyears,withratestopping9%forthefirstfiveyears,thenstabilizingat more moderate rates of approximately 4%. Bolivia, on the other hand, maintainsvirtuallyunchanginggrowthratesapproaching6%ayearovertheentireperiod.BrazilandVenezuela,fortheirpart,willshowtheslowestgrowthrates,withannualfiguresof2.7% and 2.3%, respectively, for the 2016‐2035 period. Both States will experiencesignificantdropsinthenext2–3years,laterrecoveringtostabilizeatratesapproaching3%perannum.InsofarastheairtrafficcompositionbyStateisconcerned,itisestimatedthatbytheendofthe20‐yearprojectionperiod,Brazil’sweightwillhavedeclinedfroma44%toa36%share of the region’s total passengers, given the relative increase experienced bycountrieslikeColombiaandPanama,whosesharesof14%and6%,respectively,in2015would increaseby3%each to levelsof17%and9%,respectively, in2035.Argentina,PeruandChileareothercountrieswithsignificantsharesthatwouldrepresent9%,8%and7%,respectively,oftheregion’stotaltrafficat2035.

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CargoAccordingtoBoeing26,thecargotrafficoftheSAMRegioncanbebrokendownintotwomain markets: (i) SAM – North America commercial trade and (ii) SAM – Europecommercial traffic. The SAM – North America market consists of roughly 1.1 milliontonnesofcargo,withChile,Colombia,BrazilandPeruaccountingforalmost80%ofthetotal volume transported. The SAM–Europe market, for its part, amounts toapproximately600thousandtonnesandBrazil,ArgentinaandEcuadorareresponsiblefor over 70% of the total transported. Considering that these two markets total 1.7thousand tonnesandapplyinganannualgrowthprojection figureofbetween4%and5.5%,thetotalaircargooftheSAMRegionwiththoseregionscouldexpandtoroughlybetween3.1and3.9milliontonnesalltold.

Charts 5.3.2 – Composition of the air cargo transported to North America and Europe

SAMRegiontradewithNorthAmerica SAMRegiontradewithEuropeChile;Colombia;Brazil;Peru;Ecuador;Argentina;Venezuela;Others Brazil;Argentina;Ecuador;Colombia;Chile;Peru;

Venezuela;OthersSource:“WorldAirCargoForecast2014‐2015”,Boeing.Preparation:In‐house

TherehasbeenanoticeabletrendintheSAMRegioninrecentyearstowardthesigningof bilateral and regional agreements and partnerships for decontrolling borders andexpanding relations among countries. Several free trade and cooperation agreementshave been signed with the United States, Europe and Asia. An example is the TradeAgreementbetweenColombiaandPeruwiththeEuropeanUnion,signedinBrusselsin2012, which, according to the European Commission, could save EU exporters 270million euros in customs duties, contribute to greater openness on the part of bothpartiesandfostergreatertradestabilityandpredictability.Likewise,therecentsigningoftheTrans‐PacificPartnership(TPP)among12membersoftheAsiaPacificEconomicCooperation (APEC) Forum, which includes Chile and Peru (and will add Colombiashortly),reaffirmsapolicyoftradeopening.Itisexpectedthatoverthenextfewyears,the consolidation of those benefits, combined with the adoption of trade facilitationpoliciesbyStatesintheregion,couldtriggerthegrowthoftradewithinalreadyexistingmarketsandwithnewdestinationslikeAsiaandthePacificthatshowahugepotential.

26“WorldAirCargoForecast2014‐2015”–TheBoeingCompany

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5.14 DevelopmentstrategiesThevisionof theregionat2035holdsagreatpotential forgrowth inwhichair trafficwill more that double its current value. In order to reach that development andexpansionofconnectivity,however,allofthestakeholdersinvolved(States,aircarriers,airports and air navigation providers)will have to cooperate in boosting the region’seconomicandsocialprosperity.Belowarethekeyelements‐‐inter‐relatedandofferingmutual feed‐back‐‐for the development and facilitation of better and more efficientconnectivity,whichhavebeenidentifiedspecificallyfortheSAMRegion:Diagram 5.3.1 – Key elements for the development of SAM Region connectivity

Key elements for the development of air connectivity in the SAM Region Hub airports; Air transport infrastructure; Airport processes; Air regulation; New routes; National airlines; Regional tourism; Interline alliances and agreements; Low-cost airlines Preparation: In-house

Furtherliberalizationofairtransportregulations“Freedomoftheair”ispracticedinveryfewoftheregion’sStates.TheseStatesneedtostudythelong‐termbenefitsofliberalizingtheirairspaceandavoidingtheapplicationofprotectionistmeasures,inordertoachievebettermarketconditionsthatwouldspurthedemand forair tradeand the connectivityof eachState insideandoutside the region.Thiswouldresultinmoreeconomicandsocialdevelopmentfortheterritory.ASAover‐regulationof theentryofnewaircarriersandrestrictionsonthenumberofflight frequencies and routes of existing air carriers not only reduces each territory’spotentialforconnectivity,butalsohamperstheoperationofamorecompetitivemarketthatcouldbenefitfinalconsumerswithlowerfaresorserviceofferings.The requirement for visas and complexity in obtaining them could further limit theresultsof tourismandbusinesspromotionanddisseminationefforts ineach territory.Regionally‐speaking, attention should be drawn to the cases of States like Argentina,Brazil, Colombia, Peru, Ecuador, Chile, Venezuela and Bolivia, which maintain

Ejesdedesarrollodeconectividadenla

RegiónSAM

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partnershipsforopeningtheirborderstoeachotherwithoutanyneedforavisa.ThatpolicycouldbeextendedtoalloftheSAMRegionStates,therebyfacilitatingconnectivityattheregionallevel. SomeStatesintheSAMRegionevenrequirevisasfromcountrieswhosedemandforairtransportissteadilygrowing,likeIndiaandChina.Thosedistantmarkets, which have no direct routes to the region and could significantly increasetraffic to it, could be discouraged not only by the cost of having to resort to indirectroutes,butalsobythecomplexityandadditionalcostofobtainingvisas.Lastly, attention shouldbedrawn to the importanceof the signingof cooperationandfreetradeagreementsbetweencountriesintheregionandwithotherterritoriesintheworld. The reduction of customs duties, elimination of visas and promotion of tradewouldleadthewaytoatrueliberalizationofairtransportregulationsforthebenefitofallinterestedgroups:governments,consumersandenterprises.

StrengtheningofflagcarriersNational airlines can be publicly or privately‐owned, but often neither the State, norlocalinvestorshavethelevelofexpertiseandcapitalnecessarytobuildastrongnationalaircarrierthatwouldnotonlyhelpdevelopthetransportmarketwithinitsterritory,butwouldalsogainaprominentpositionforitselfattheregionalandeventheinternationallevel. Regulationsoftheregion’sStatesrestrictforeigninvestmentinnationalairlines,discouraging consolidated foreign groups from entering the territory, acceding toeconomiesofscale,reducingcostsandtakingadvantageofefficientoperatingplatformsinordertoprovidelocalconsumerswithbetterserviceatalowerprice. OptimizationofairtransportinfrastructureAs stated previously, the installed capacity of airports and air navigation systems foraccommodating expected passenger and cargo flows is an essential element withoutwhichneitherairlines,norStatescanexpand theconnectivityof the regionandof itscomponent territories. ICAO’s planning of air navigation infrastructure at the worldlevelisconsideredintheGlobalAirNavigationPlan(GANPV2016edition).TheGANPconsistsofstrategicmethodologyrenewableat15yearsthattakesadvantageofexistingtechnologyandforesees futureadvances intermsofoperationalobjectivesagreedbyStatesandtheaviationindustry.Theimprovementsbyblocksareorganizedinto six‐year periods that donot overlap and run from2013upuntil 2031 and evenlater. This structured approach offers a basis for ensuring the security of strategicinvestment and will create a commitment on the part of States, equipmentmanufacturers,operatorsandserviceproviders.A performance‐based implementation plan (PBIP) has been developed at the SAMRegion levelwithastrategy for implementationofairnavigation infrastructure intheSAMRegion in linewith theGANPthat initiallycovers theperiod from2013 to2018.(FurtherdetailscanbefoundintheSAMPlanairnavigationsection.)The timing for increasing the number of flight routes and/or frequencies in a givenairportwilldependuponseveralfactorslike:thecapacityandnumberofrunways,thesizeandnumberofterminals,thenumberofembarkationports,thesizeoftheaircraftparking andmaintenance spaces, the capacity for management of a given number offlightsperhour,andtheoutliningofroutecharts,amongotherservicesprovidedtoairoperators. Consequently, it is theairportconcessionholderandairnavigationserviceproviders that in the endwillmake it possible to effectively increase connectivity by

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expanding the installed operating capacity and/or implementing technologicalinnovations for speeding up air traffic, reducing operating times and costs andoptimizing security, seamlessness, orderliness and efficiency of ground and airoperations.

SimplificationofairportprocessesIt is important to stress that seamless air traffic flow depends upon the speed andsimplicityofcheck‐in,security,immigration,customs,embarkationanddisembarkationprocesses. Airports in the SAMRegion stillmaintain a largenumberofpractices thatresultinlongwaitingtimes,queuesandbottlenecksthatworkagainstairconnectivity.Thoseshortcomingsneedtobeidentifiedand, insofaraspossible,theuseofcomputerprogrammes implemented to simplify passenger services and the registration of theirpersonal information for use by the different stakeholders involved. The goodinternational practices of the most efficient airports, like those implemented in theairportsofLasVegas,AmsterdamandSeoul,shouldbeimitated.ICAO,throughtheAviationSafetyandFacilitationGroup,hasputforwardaproposalfordevelopmentofproceduresforaOne‐StepSecuritySystem(OSS)tofacilitateairtrafficmanagement in theSAMRegion. Thissystemwillmake itpossible tooptimize transitcontrolprocesstimesinwhichthepassengerandcabinandhandbaggagearecheckedatthe point of departure and will not require further baggage checks during transit toanotherairportintheregion.Whilethiswillrequirethesigningofbilateralagreementsbetween States, it is very important that all States in the SAM Region adopt thatprogramme. (Furtherinformationcanbefoundinthesectiononaviationsecurityandfacilitation.)Another recommendable practice for standardizing customs export and importprocessesamongall of theStateswouldbe to fostera regional agreement so that thesame standards, regulations and requirements would be applied to the transport ofcargoinalloftheStates.Thatwouldgiveforeigncountriesasingle,clearly‐definedsetofrequirementsandprocessestobefulfilled,allowingthemtofilethesamedocumentswitheachStatethroughwhich theirgoodspass. Thiswouldsimplytheprocessesandspurforeigninterestindevelopingheavytradewiththeregion.

OptimizationofthelevelofchargesandtaxesIn recent years, airports, in order to recover their investments, and governments, tofinance their passenger services, have created charges and taxes that passengers orcargo must pay, thereby making air transport more expensive, to the detriment ofconnectivity.Most of the Region’s States apply a VAT to the international airfares of departingpassengers. That practice is questionable becausemost of the service is provided ininternationalairspace,withonlyaminimumpercentagebeingsuppliedwithintheState.Another example of costs that should be re‐evaluated is the charging of VAT onoverflight services, still practiced by some States in the region. The trend at theinternationallevelistoeliminateorreducetaxesonairtraffic,forbetterregulationandthe reduction of such taxes would have a direct impact on those States’ demand forconnectivity. ICAO, in its global recommendations, maintains a position in favour ofhavingStatesexaminethesituation.

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Toconclude,thecomplexityandcostofcustomsproceduresactasabrakeonacountry’scapacity for internationaltrade. Thereviewandreductionof taxesandcharges leviedontradeingoodsandtheapplicationofinformationtechnologytocustomsproceduresin keepingwithOMA recommendations and guidelineswill benefit export and importprocesses by promoting the flow of goods and capital to/from each territory for thebenefit of consumers and of the local producers that exploit their comparativeadvantages.

PromotionofnewroutesAscanbeseenfromtheaboveanalysisoftheSAMRegion’slevelofconnectivity,therearestillveryfewdirectroutestotheMiddleEast,AfricaandAsiaandthePacific.Thisisespeciallynoticeable in thecaseofair cargo,where less than2%of the total tradeofthose regions is with the SAM Region. New routes should be promoted from thevantagepointofbothsidesofthemarket:supplyanddemand.Ontheonehand,Statesshouldworkcloselywithairlinestopromotetheadoptionoffavourableregulationsandinfrastructure for facilitating the opening of new routes and/or the entry into themarketofnewcompetitors.Ontheother,thelocaltouristindustryandbusinessneedpromotion and strengthening in order to boost the creation of a demand fordestinationsthatwouldensurethesustainabilityofthoseroutesinthelongterm. EstablishmentofaregionaltourismpartnershipTheglobaldemandfortourismisrisinginthemarketsofChina,IndiaandAsiaPacific,regionswhoseconnectionswiththeSAMRegionarestillverylimited.Inordertoreachtheregion,thosetouristsmusttakeindirectroutes,makeverylongtripsandpurchasevery expensive airline tickets, thereby restricting the demand for connectivity fromthosepointsoforigin.Therefore,onepossibilityforattractingthosetouristsisforStatesin the SAM Region to join together in groups to create visa‐freemultiple‐destinationtourist programmes covering visits to several territories, and thereby enhance theattractionoftheregion’stouristoffering. ConsolidationofhubairportsTheairlines thatoperate in the regionanalyze thegeographic locationsof its variousairports and, together with the States, determine the feasibility of establishing huboperations inmajorand/orsecondaryairports inorder toconcentrateanddistributeairtrafficinsideandoutsidetheregion.WhiletheprincipalairportsofBrazil,Colombia,PanamaandPerucurrentlyoperateascentres for connection at the regional level, some still show signs of inflexible orinefficient management of passenger and cargo flows. These make it impossible toproperlymaximize their respective levels of connectivity andmake themost of theirpotential. ICAO,with the support of the States, has developed improvements in airnavigationandaviationsecurity. (Moredetails canbe found in theairnavigationandaviationsecuritysectionsoftheSAMplan):

ATFM (Air Traffic FlowManagement): aimed at efficient air traffic flow

managementwhilerespectingexistingsecuritylevels. ACDM (Airport‐CollaborationDecisionMaking): with a view to ensuring

the efficiency of the ATFM programme, it groups together air trafficcontrollers, airport operators, air carriers and ground personnel,appropriately coordinated for the exchange of data while respectingcommunicationstandards.

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API(AdvancePassengerInformation):asstatedpreviously intheanalysisof this task, this document optimizes the immigration control of passengersbothenteringandleavingaState.Thisstandardtechnologyiselectronicandis transmitted hours before the arrival/departure of a flight and containspersonal informationabouteachpassenger. Thismakes itpossibletospeeduptheprocessanditselectronicandcodednaturecontributestothesecurityofthetransmissions.

Airportsandairnavigationsystemsneedtobeoptimizedinordertoequipthemwithappropriatephysicalandtechnologicalinfrastructurecapableofhandlingtheexpectedlevelofairtraffic.Theefficiencyofpassengercontrolprocessesalsoneedsreviewinginordertoreducequeuesandprocessingperiodsandfacilitatetheformalitiesoflocalandin‐transitpassengers.It should be added here that the benefit of the hubs’ operation is not limited to theeconomicboosttheygivetheStatesusedforthatpurpose;therestoftheStatesintheregionalsobenefitfromthebetteroperationprovidedbyregionalhubsinallowingforand facilitating the opening of indirect routes to spur both passenger and cargoconnectivitybetweencitypairswhosedirectlink‐upisnotyeteconomicallyviable.Asaresult, the consolidation and efficiency of hub airport operations is of interest to allStates, for they contribute to the growth of air traffic and trade within the region,promotetheopeningofnewroutesandsparktheinterestofnewinternationalplayersandtheirentryintothemarket.ThereisstillroomtodayintheSAMRegionforthecreationofnewhubairportsthat(i)couldserveasthebasisforconnectionsamongaState’sdomesticroutesandoperateasa distribution centre for passenger and cargo traffic; or (ii) could participate in thedistributionofinternationalroutestootherStatesandwithdomesticconnections.Itisthe airport operators that should coordinate the strategies for attracting a given aircarriertostartpoint‐to‐pointoperationsandthenmoveontoconnections. Proximityto other hub airports that are oversaturated frequently offers a good opportunity todevelop infrastructure and promote better connections with minimum connectionperiods. Another interesting alternative is to develop airports with connections forintermodaltransport.Thisisamixedair‐groundmodelthatattractsdifferenttypesofconsumers whose decision is to combine transport methods. It should also bementioned that it is important for an airport to develop services and shops that areattractivetoin‐transitpassengersduringtheirconnectionperiods.TheBolivianState,forexample,hascurrentlyentered intoapartnershipwithAsian investors tosetupahub airport in Santa Cruz that would make it possible to distribute cargo traffic viaconnectionsatthe4latitudes(Source:AirLatinNews).Inanyoftheforegoingcases,ahubairportshould,first,makethenecessarystudiesofthetraffic,passengerflow,routesandconnections,anddrawupthemasterplanforthegroundarchitectureandcoordinationfortheairnavigationsystemsneededforahub.Theairlineswilldecidewhetherornottocentralizetheiroperations,dependingupontheavailabilityofeconomiesofscale,advancedairnavigationtechnology,andshorterflighttimes,whilealwaysensuringsafety. Entryintoanddevelopmentofthelow‐costairlinemarketThe worldwide appearance of low‐cost airlines has spurred the level of connectivitybetween neighbouring countries and of domestic traffic within a single State. The

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presenceoftheseoperatorsenhancesconnectivitybecausemoreroutesandfrequenciesaremadeavailableatpricesaccessibletoalargerpopulationgroup.High‐costairportservicesinprimaryairports(landing,take‐off,passengerpick‐upandaircraft parking charges, etc.) reportedly limit those operators to concentrating theirflights in secondary airports that economically validate their operating system ofcharging lower airfares to the public. That situation reduces the potential fordevelopmentofconnectivitythatcouldresultfromtheoperationofthoseaircarriersinmajorairportsorhubsfordomesticandinternationalroutes. PromotionofinterlinepartnershipsandagreementsThe global trend is toward cooperation and the establishment of partnerships amongairlines to jointly operate routes that are not viable individually. Those agreementspromoteagreaterdemandforconnectivitybecausetheyofferthepossibilityofaccedingto indirect routes that are simpler and more reliable (a single check‐in and baggagedelivery at the starting point), together with other benefits like passenger loyaltyprogrammes. Theregion’sairoperatorshavenotremainedunaffectedbythosetrendsandareconstantlyseekingopportunitiesfor jointoperationsandsynergiesthatwouldoptimizetheiroperatingcostsandenablethemtoofferuserscompetitiveairfares,witha view toward increasing their passenger flows. It should be added here that thesuccessful operation of those alliances requires strong government support andcooperationandfavourableairregulations.

5.15 LinkbetweentheUnitedNationsSDGsandICAOSOsAccordingtoICAO,itscurrentStrategicObjectives(SOs)arecloselyrelatedto13ofthe17 United Nations Sustainable Development Goals (SDGs). The organization iscommittedtoworkinghand‐in‐handwiththeStatesandotherimportantbodiesfortheachievementandoversightofthosetargets.Furthermore,andspecificallyintermsofconnectivity,theexpansionofSAMRegionairconnectivityoverthenext15yearsisakeyelementthatwouldcontributetoboostingtheeconomicandsocialdevelopmentofthecountriesand,therefore,isinlinewiththeachievementofalargepercentageoftheUnitedNationsSustainableDevelopmentGoals.The10goalsinwhichconnectivitydevelopmentplaysanimportantrolearediscussedindetailbelow:

Diagram 5.6.1 – Sustainable Development Goals influenced by better connectivity

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1 NOPOVERTY;3GOODHEALTHANDWELL‐BEING;4QUALITYEDUCATION;5

GENDEREQUALITY;8DECENTWORKANDECONOMICGROWTH;9INDUSTRY,INNOVATIONANDINFRASTRUCTURE;10REDUCEDINEQUALITIES;12RESPONSIBLEPRODUCTIONANDCONSUMPTION;13CLIMATEACTION;17PARTNERSHIPSFORATTAININGTHEGOALS

The operation of a globalmarket that would offer opportunities for prosperity to allpeopleisthefinalpurposeforlinkingupthevariousterritoriesthatcomprisetheregion,bothwitheachotherandwiththeworld,throughthejointeffortsofgovernmentsandtheprivatesector.Inter‐connecting cities inside and outside the region brings prosperity to countries,leading to millions of jobs, gross domestic product growth and investment ininfrastructure development within and outside the aviation sector, thanks to thecatalyticeffectproducedonvariousactivitiesassociatedwiththeindustry(liketourismandtrade).Theeconomicandsocialdevelopmentfosteredinthecountriescontributestothefightagainstpovertyandimprovesthepopulation’saccesstobasicservices likeeducationandhealth,offeringpeoplegreaterpossibilitiesforemploymentandaddingtotheresourcesreceivedbygovernmentsforsubsequentinvestmentinsocialprogrammesandthestrengtheningofinstitutionsthatservethepeople.Airconnectivityalsooffersdevelopingcountriesanopportunitytojoinintheeconomicdevelopment of other, more advanced nations and to take advantage of theircomparativeadvantagesandtheresourcesoftheirlocalproducerstobreakintoalargermarket with more purchasing power, share technology and innovations and enter amore competitivemarket for thebenefit of all consumers. The aviation industry alsomakesitpossibleforcommunicationandconnectionwithtownsandcommunitiesthatare remote and located in rugged terrains that would otherwise find themselvesbypassed by economic progress or with limited access to basic health and educationservices.Airconnectivityreducesinequalitiesamongcountriesandallowsforthejointeconomicdevelopmentofdifferentkindsofnationsandindustries.

Theaviationindustryisrecognizedasbeingoneofthepioneeringsectorsthatfromthevery outset has offered various opportunities for employment and valued the role ofwomen as professionals. Gender equality can be found along the entire length of theproduction chain, where both men and women occupy positions in airlines, airports,travel agencies, hotels and tourism, among other businesses. In recent years,womenhaveevenenteredthemarketforairlinepilotsinsideandoutsidetheregion.It isalso importanttomentiontheexplicitcommitmentof theaviation industryto thefight against climate change. While this isnot adirectobjectiveof the increase in airconnectivity,itisimportanttoconsiderthattheglobalaviationindustryhascommittedto invest intechnologyand innovation inordertoreduce itscarbonemissionsdespitetheprojectedincreaseinitsoperationsand,by2050,toreduceitscarbonemissionsto

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50%ofnetemissionslevelsof2005,makingitanindustrythatissustainableinthelongterm.Toconclude,itshouldbementionedthatalloftheseglobalgoalsarepossiblethankstothe levels of integration and globalization resulting from the interconnection of theworld’sdifferenteconomiesandnations.Connectivityofitselfmakesitpossiblefortheoperation of multilateral institutions like the United Nations and ICAO, in which thegovernments of different countries cooperate to improve the living standards anddevelopmentoftheworldasaninterlinkedunit,thankslargelytothecontributionoftheaviationindustryanditsconnectivitynetwork.

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6 TacticalmeasurestooptimizeSAMRegionconnectivity6.10 GeneralFramework

This module has developed a detailed analysis of the importance and level ofconnectivity of each State in the SAMRegion. It has also put forward the vision anddevelopment strategies for improving that connectivity in benefit of the sustainabledevelopment and well‐being of the population in each of the region’s territories. ItshouldbestressedthatthatanalysisiscloselyalignedwithICAO’smissionandgeneralvision,aspresentedbelow:ICAO

Vision

ToachievethesustainablegrowthoftheglobalcivilaviationsystemMission

ToserveastheglobalforumofStatesforinternationalcivilaviation.ICAOdevelopspoliciesandstandards,undertakescomplianceaudits,performsstudiesandanalyses,providesassistanceandcreatesaviationcapacitythroughmanyotheractivitiesandthecooperationoftheMemberStatesandotherstakeholders

ICAO, it should also be stated, points up the importance of the role played by airtransport as a safe and efficientmedium that contributes to the development of eachState’ssocialandeconomicpriorities. Asaresult, thekeyorfocalpointofanyactionframeworkshouldbetoensurethesafetyofairoperationsandmaintainahighlevelofSafetyandAirNavigationcapacityandefficiency.Objectives,areasofactionandmetricsforimprovingandmaximizingtheconnectivityofeach and every one of the SAM Region States are listed below. Each one of theconnectivity development strategies identified earlier for the specific case of the SAMRegionwill be addressed for thatpurpose.As is tobe inferred, adequate support andcommitmentonthepartofeachoftheStateswillbecrucialforguaranteeingthesuccessofthemeasurestobeundertaken.6.11 ObjectivestobeachievedThetablebelowsummarizesthespecificobjectiveswithineachSAMRegionconnectivitydevelopmentstrategy.Someoftheobjectives,itshouldbestressed,fitwithinmorethanonestrategy,buthavebeenincludedunderthemostrepresentativeone: Strategy Objectives

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Strategy Objectives

ALiberalizationofairtransportregulations

Takemeasurestoachievemoreopennessandflexibilityinthefollowingareas:16. Internationaltrafficrights(freedomsoftheair)17. Immigrationcontrolpolicy(visas)

BStrengtheningofnationalairlines

18. Permit foreigninvestment inordertoreinforcetheoperationandsustainabilityofnationalairlines

COptimizationofairtransportinfrastructure

19. RemovetheprincipalrestrictionsoncapacityinthegroundandairzonesofeachState’smostimportantairports

D Simplificationofairportprocesses

20. Update airport processes to securemore seamlesspassengerandcargotraffic

21. Facilitate and simplify security controls for in‐transitpassengers

EOptimizationofthelevelofchargesandtaxes

22. Reduce charges for and/or eliminate taxes on airtransport

23. Make improvements in the control of operatingchargesappliedbyairportstoaircarrieroperators

F Promotionofnewroutes

24. Expandtheexistingdirectroutenetworktoachievemoreintra‐regionalconnectivity

25. Enter newextra‐regional destinations andmarketsofcountrieswithagreatpotentialforgrowth

GEstablishmentofaregionaltourismpartnership

26. Jointlyattract travellers fromdistantcountriesandregionswithareducedpresenceintheSAMRegion,like Asia and the Pacific, the Middle East andOceania

HConsolidationofhubairports

27. Strengthen the operation of existing and potentialregional and domestic hubs to ensure that eachStatehasatleastoneefficienthubairport

I

Entryintoanddevelopmentofthelow‐costairlinemarket

28. Fosteranincreaseinthesupplyofflightsandroutesatmore competitiveprices inorder tobringaboutthe inclusion of a larger percentage of each State’spopulation

29. Promotesecondaryairportsinordertoboosttrafficdevelopmentincitieswithlittleconnectivity

JPromotionofinterlinepartnershipsandagreements

30. Establishafavourableregulatoryframeworkfortheentry/operation of new airlines throughpartnerships

6.12 Mainmeasures,specificactivitiesandcompliancemetrics

Withinthepresentplanofaction,eachobjectivedescribedaboveisaccompaniedbyaseries of principal measures and activities and specific metrics for guiding andfacilitatingitsappropriatecompliance.Itshouldbestressedthatthelistincludesshort‐andmedium‐term targets that could serve as foundations for the expected growth at2035. Below is a detailed explanation of each measure proposed together withsuggesteddeliverydates:Objective1:Greateropennessofinternationaltrafficrights

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TheASAs in the SAMRegion,whetherbilateral ormultilateral, are limited,with veryfew “open skies” exceptions in some States. Most of the ASAs still adhere to theBermudamodelestablishedasastandardover50yearsago,whichconsidersneitherchanges nor the current state of relations among countries and the importance offacilitatingtheglobalizationprocess.

Action1:ReviewthecontentsandnumberofASAsonairtrafficrightssignedbyeachState,putforwardaproposalwithalistofcountriestosignaddendaornewagreements,andmoveaheadwiththosechanges.

Specificactivitiesandcompliancemetrics: Target Date

Reviewandpresentationofproposals 100%oftheStates 2020 Signing of new agreements or addendawithallStatesintheSAMRegion

100%oftheStates 2023

Signing of new agreements or addendawithStates in other regions where traffic andtradingoperationsarealreadyunderway


Objective2:Makeimmigration(visa)policymoreflexibleThe institution ofmore flexible immigrationpolicy and control is a frequent practicethatisgaininggroundatthegloballevelinbenefitofgreaterglobalconnectivity.SomeStatesintheregiontodaydonotrequirevisastoentercountriesintheEuropeanUnionand similar processes are being negotiated with the United States and Canada.Regionally‐speaking, although a large percentage of the States are exempt from therequirementtoobtainvisastoentereachother,thisopeningisnot100%complete.

Action2:Securevisaexemptionsor,otherwise,eliminaterestrictionsandcomplexvisarequirementsforpurposesoftourism,transitandbusiness,amongotheractivities.

Specificactivitiesandcompliancemetrics:

Target Date

Exemptionfrom/eliminationofvisarequirementsbetweenStatesintheSAMRegion


Revisionof agreements, eliminationand/orfacilitation of the visa process for States inotherregionswherevisasarestillrequired


Objective3:Permit foreign investment inorder to reinforce theoperation andsustainabilityofnationalairlinesTheexpertiseacquiredbyairlineswhoseoperation isalreadyconsolidated insideandoutside the SAM Region can play a key role in ensuring adequate investment in anddevelopmentandsustainabilityofaviationineachState.Partnershipswithestablishedairlines wishing to invest in a given territory can offset limitations in the capital,operational capacity and/or experience of local private or State‐owned airlines.Regulatoryopeningtosuchpossibilitieswouldcontributetothedevelopmentoffurtherconnectivityforthepeople’sbenefit.

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Action3:Makeregulationsgoverningforeigncapitalinvestmentincommercialaviationmoreflexible


Permit all airlines originating in the SAMRegion to acquire majority shareholdings(at least 51%) in the national airlines ofeachState

50%oftheStates75%oftheStates

20222028

Secure a greater opening to the entry offoreign capital from one or moreinternational regions in order to gradually(bystages)reacha51%shareholding

75%oftheStates 2035

Objective4:RemovethemainrestrictionsoncapacityinthegroundandairzonesofeachState’smostimportantairportsSignificant growth in the existing level of infrastructurewill beneeded to sustain theexpectedmajor increase in flights,passengersandcargo, if the region is todouble itstotal trafficby2035.As a result, States, airportoperators, providersof airnavigationservicesandairlineswillneedtoworktogetherandperformanongoinganalysisoftheexisting installed capacity and improvements needed to reach that connectivityimprovementtarget.

Action4:Ensurethateachoftheregion’sairportshas theoperatingplansrecommendedbyICAOandcomplieswithcertainoperationalefficiencystandards27


Target Date

Check to see that each of the region’sairports has a Master Plan, OperationsManual, Maintenance Manual, SecurityPlan, Emergency Plan and AircraftRemovalPlan


Analyze the traffic by airport to ensurethat runwayutilizationduringpeakhoursdoesnotexceed70%ofthetotal installedcapacity


Comply with the following maximumstandardsrecommendedbyICAO:o Outboundpassengerservice:60mino Inboundpassengerservice:45mino In‐transitpassengerservice:30mino Importcargoservice:4hoursuntilits

delivery

Compliancewith80%ofthestandard

Compliancewith100%ofthestandard

20252030

Ensure that each State achieves a total 50%oftheStates100%oftheStates

20252035

27“ControlandmonitoringmeasuresthatStatesshouldapplyinaprivatizedairportsenvironment–Airportoperationalefficiency”–ICAO(1999)

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airportdensityratioofat least1.0andaninternational airport density ratio28of atleast0.5

Implement the ICAO PBIP navigationsystemwhichsetsouttheimplementationstrategyforairnavigationinfrastructureinthe region, in linewith theGANP(see thesectiononairnavigationfordetails)


Periodically monitor each airport’sperformancetoconfirmthatithasplanstoaccommodatetheannualgrowthintraffic

In100%oftheStatesatleastoneauditperyear

Asof2019

Objective 5: Update airport processes to securemore seamless passenger andcargotrafficDifferent types of technology have been applied in the most important airportsthroughout of the world to simplify and automate registration, security, customs,embarkation, disembarkation, baggage collection and other processes. All of theimprovementsthathavebeenimplementedpromotemoreseamlessairtrafficinbenefitofgreaterconnectivityandalsomakeitpossibletoreduceoperatingcosts inthe longrun by eliminating the inefficiencies and overcrowding created by extra costs forairlinesandpassengers.

Action5:Updateairportprocessesintheprincipalairports,byState,throughtheadoptionofnewtechnologyinkeepingwithgoodinternationalpracticesuccessfullyaccomplishedinotherregions


Implementation of self‐service check‐inmodules


20202030

Implementation of a centralized baggagedrop‐offareaforallairlines

50%oftheStates70%oftheStates100%oftheStates

202020252030

Adoptionofnewsecuritycontroltechnologythatwouldminimizepassengerwaitingandsecurity check times to reach internationalbenchmarks (i.e.: security metal detectorarches,x‐raymachines,etc.)


20252035

Establishment of an electronic immigrationsystem that would expedite waiting timesandarrivalanddeparturecontrolprocesses(API ‐ Advance Passenger Informationtechnology, homogeneous language for allStates)


202520302035

Modification of the customs clearanceprocess by eliminating random checks(greenorred lights) to follow international


20202025

28TotalairportdensitymeasuresaState’stotalairportsdividedamongitspopulationinmillionsofinhabitants.Internationalairportdensityissimilartotheformerratio,butconsidersonlythenumberofinternationalairportsinitscalculation.

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exampleswhere the passenger is given thechoice between “something to declare” or“nothingtodeclare”

Objective6:Facilitateandsimplifysecuritycontrolsforin‐transitpassengersAccording to the system currently applied in the SAM Region, in‐transit passengersundergo security checksat thepointoforiginandagainat eachairport in the regionwhere they take connecting flights until they reach their destination. ICAO and the“Aviation Security and Facilitation Group” have made a recommendation on theimplementationofaOne‐StopSecuritySystemforin‐transitpassengerstocontributetomoreseamlesstrafficandthereinforcementofhubs.BilateralagreementswillneedtobesignedbetweenStatestoputthosechangesintoeffect.Action6:ImplementationoftheOSS(One‐StopSecuritySystemforin‐transitpassengers)intheSAMRegion


SigningofthenecessaryagreementsamongtheStatesintheSAMRegion


20222025

ImplementationoftheOSSsystem 50%oftheStates100%oftheStates

20252030

Objective7:Reducechargesforand/oreliminatetaxesonairtransportThe application of taxes or charges to air transport are some of the measures thatproduceextracostsforconsumersandaircarrieroperators.Theimpositionoftaxesoninternationalairfaretickets isconsideredanuntechnicalpractice(inasmuchasmostofthe service is provided outside the country’s territory) thatmakes the cost of airfaresconsiderably more expensive. In like manner, the tax on overflights discourages aircarrieroperatorsfromflyingovercertainterritoriestothedetrimentofamoreefficientroutestructure.Veryfewoftheworld’scountriestodayfollowthatpractice,but2Statesin the SAM Region continue to do so. According to the study “Economic Benefits ofReducing Aviation Taxes in Latin America and the Caribbean” conducted by SEOAmsterdamEconomics,exemptionfromtaxesandreductionofchargesonairtransportinSouthAmericacouldboostairtrafficbyatleastanadditional15%.

Action7:Reviewofthechargesappliedandoftheirimpactonthecostofairtransportforconsumers,formulationofaproposalandimplementationofataxreductionand/orexemption.


Reviewof the charges and taxes applicabletonationalandinternationalairtransportineachStateandpreparationofaproposalfortheirreductionand/orexemption


20252030

Exemption from the payment of VAT oninternationalairfaretickets


202520302035

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CompletionoftheexemptionfrompaymentofVATonoverflightsinallSAMStates


Objective8:Make improvements in the controlofoperating chargesappliedbyairportstoairoperatorsTheapplicationofairportchargestoaircarrieroperatorsfortake‐off,landing,parking,refuelling, cargo transport, etc. raises the operating costs considerably, leading in theend tomore expensive airfare tickets. Heavy charges disincentivate the operation ofairlinesingivenairports,tothedetrimentoftheStatewheretheyarelocated,makingitimportant for government regulations to ensure an optimum level of charges for theterritory.Action8:Reviewcurrentairportcharges,establishmaximumlevelstobeappliedandincorporatespecialsystems


Reviewofexistingchargesbyairportandoftheirimpactonagreaterflightofferingandestablishmentofmaximumratesbyactivity


20222030

Implementation of special airport chargesfor airlines during hours of low flightfrequency


20222025

Objective 9: Expand the existing direct route network to achieve more intra‐regionalconnectivityAtpresent,notallofthe14Statesintheregionareinterconnectedbydirectroutes,withorwithoutstops.PassengerswishingtotravelfromChiletoFrenchGuiana,forexample,willnecessarilyhave tomakean intermediateconnection inNorthAmericaorCentralAmerica,resultingininefficiencystemmingfromlongroutesandextraconnectioncosts.

Action9:Reviewtheexistingroutesamongthe14Statesof theSAMRegionandevaluatethepossibilitiesforimprovingthatroutesystemtoachievebetterinterconnection


Target Date

Interconnection of the States within theregionsothatitwillnolongerbenecessaryto leave the region in order to take anindirect route to another State in the SAMRegion.


Promotion,incentivationandraisingofeachState’s connectivity ratios with the rest ofthe region, in order to reach a level of atleast29%(directnon‐stopconnectionwithatleast4StatesintheSAMRegion)


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Objective10:Enternewextra‐regionaldestinationsandmarketsofcountrieswithagreatpotentialforgrowthAsmentionedintheprevioussectionofthismodule,therearestillseveralregionsandcountrieswithfewdirectconnectionswiththeSAMRegion.Foremostamongtheseareseveral emergingmarkets that are global economic leaderswitha risingdemand, likeChinaand India. TheSAMRegionneeds to increase itsconnectivitywithregions likeAsia and the Pacific, theMiddle East, Africa and Oceania, above all in the case of aircargo.Action10:AnalyzetheoptionsforcreatingnewroutesbetweeneachStateintheSAMRegionandregionswithwhichconnectionstodayarefewornonexistent


Creationofat least3newdirect routesperStatetootherregionsoftheworld

75%oftheStates 2025

Having at least one direct route in each ofthe following regions: Asiaand thePacific,theMiddleEast,AfricaandOceania


20302035

Objective11: Jointlyattract travellers fromdistantcountriesandregionswithareducedpresenceintheSAMRegion,likeAsiaandthePacific,theMiddleEastandOceaniaTherearesomedistantmarketswithculturesandlanguagesthatareverydifferentfromthose of the region, which today must currently take indirect‐‐and, therefore, morecostly‐‐routes for purposes of tourism in some country in the region that could be ofinterest to them. Those costs and language barriers could constitute an importantdisincentive, with the result that inmany cases that investment in tourismwould beworthwhileonlyifmorethanonedestinationcouldbevisited.

Action11:Agreeuponandcarryoutajointevent(“SouthAmericawithinreach”)topromoteandattracttourismfromdistantregionstotheSAMRegion


Establishment of an organizing committeeon which each participating State isrepresentedandselectionof thevenueanddateoftheevent.

Withtheparticipationofatleast50%oftheStates 2020

Preparation of the event (estimation anddistribution of costs, preparation ofpresentations, invitation to importantpersonsintheindustry,etc.).

Endoftheactivity 2022

Holdingoftheevent Endoftheactivity 2023

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Objective 12: Strengthen the operation of existing and potential regional anddomestichubstoensurethateachStatehasatleastoneefficienthubairportTheexistenceofhubairports for international and/ordomestic connections increasesthepossibilitiesforagivenregionorState’sconnectivitybyfacilitatingtheoperationofindirectroutesanddirectrouteswithstops. Thoseairportsmustcomplywithcertainconditions as to geographic positioning that favour them as the best points forconnection and access to other cities. This, however, is not enough to guarantee thattheir use as hubs will end up being beneficial; investments must also be made inadequateinfrastructureandefficientin‐transitprocessesmustbeimplementedinorderfortheircomparativeadvantageofbeingchosenbypassengersandairlinesasacentreforconnectiontomaterialize.

Action12:Analyzethegeographicpositioning,potentiallevelofpassengerandcargotraffic,existinginfrastructureandinvestmentneededtoselectandincreasethepossibilitiesofeachState’sprincipalandsecondaryairports’servingashubpoints.


Analysis of the existing traffic (passengersandcargo)intheprincipalairports,byState,radiusofgeographicinfluenceandpotentialradius of additional action were they tooperateashubs


20202025

Preparation of the plan for investment ininfrastructureandinimprovinggroundandair processes in order to guaranteeadequate operation at peak hours inairportsidentifiedashubs


20222028

Consultation with airlines that could beinterested or that already operate aconnectioncentreinthoseairportsinordertoheartheircommentsandsuggestions


20222028

ImplementationoftheMasterPlan 50%oftheStates100%oftheStates

20252030

Objective 13: Foster an increase in the supply of flights and routes at morecompetitiveprices,inordertobringabouttheinclusionofalargerpercentageofeachState’spopulationLow‐cost airlines have invigorated the air connectivity market in Europe and NorthAmericabybroadeningroutefrequencyandalternativeswithinaterritoryatpricesthatare more competitive and accessible to a larger percentage of the population. TheirentryintotheregionislimitedasyetandcouldheavilybenefiteachState’sdomesticandinternationalmarketsonshortandhighlytravelledroutes.Action13:Participateineventsandapproachlow‐costoperatorstopromotetheirentryintoStatesintheSAMRegion


ParticipationbytheSAMRegionin“Routes” 100%oftheStates 2020

DRAFT

191

or a similar event in order to makepresentationstolow‐costairlinesinterestedinoperatingintheregion

Arrangement of one‐on‐one meetings withoperators that show the most interest inoperating in a given State, in order to heartheirconcernsandobtainfeedback

Atleast1meetingbetweentheStateandan

operator2021

Entry of at least one new low‐cost airlinewithanoperatinglicensethatwouldexpandtheexistingroutenetwork

50%oftheStates 2025

Objective14:PromotesecondaryairportsinordertoboosttrafficdevelopmentincitieswithlittleconnectivitySecondary airports are of key importance in the redistribution of traffic within eachStateinordertodecentralizethebenefitsofgreaterconnectivityandmakeitaccessibletoalargerpercentageofthepopulation. Thecurrentsystemoflow‐costairlinesofferstheopportunity topromotesecondaryairportswithmorecompetitiveoperatingcostsandtherebyboostnewroutesandimprovetheconnectivityofaStateasawholeandnotjustofitscapital.Action14:Adjusttheregulatoryframeworkandinstalledcapacityofsecondaryairportstofacilitatetheentryofnewairoperators

Specificactivitiesandcompliancemetrics: Target Deadline

Analysis of the current condition of theprincipal airports, by State (including anairlineoperatingcostsbenchmark)


Review of the legislation regulating theentry into and operation of newair carrieroperatorsinsecondaryairports, inordertofosteramorefavourableenvironment


Entry of a new low‐cost airline with anoperating license and routes in at last 1secondaryairport


20252035

Objective 15: Establish a favourable regulatory environment for theentry/operationofnewairlinesthroughpartnershipsAirlines reachadecision to operatewithin a State only aftermaking a thorough cost‐benefitanalysisoftheexpectedtrafficdemandandoperatingcosts. Itisverycommonpractice to establish partnerships for operating flights jointly and sharing costs (codesharing)andtherebyaccedetoroutesthatwouldnototherwisebeviable.Furthermore,airlines, above all those from distant regions, prefer tomake an initial approach to aStateinwhichtheyareinterestedthroughrepresentativeoffices(GSAs)thatwouldselltheirairfareticketsforindirectroutestothatStateeventhoughtheylackanoperatinglicenseandmustenter intopartnershipswithalreadyoperatingairlines. In thatway,theyareabletoobtainsamplesandinformationaboutthepotentiallevelofdemandtowhich theycouldaccedeand laterdecide inasecondstagewhether tostartoperating

DRAFT

192

directly non‐stop or with stops, if necessary. According to IATA, strategic alliancesamongairlines(StarAlliance,OneWorldandSkyTeam,amongothers)currentlycoverover80%ofAtlanticandPacificairtraffic.

Action15:RevieweachState’sinternalregulationstoensurethatnoobstaclesexisttotheformationofstrategicpartnershipsoralliancesand/ortheentryofnewaircarrieroperatorswithoutadirectpresenceinthemarket

Specificactivitiesandcompliancemetrics: Target Dead‐line

Revision of standards and regulations byStates in order to secure greater opennessand/or a reduction of existing obstacles tojointoperatingsystemsandpartnershipsoralliances (i.e. code sharing and commercialcooperation,amongothers)


Review and improvement of existingregulations in order to allow for theoperation of offline airlines represented byGSAs (i.e.: obligation to establish branches,taxregistrationproblems,etc.)


DRAFT

PlanofActionSummaryObjective Activities Targets Date1)Greateropennesstointernationalairtraffic(ASAsandfreedomsoftheair)

ReviewofexistingASAsandproposalofamendments 100%oftheStates 2020 SigningofSAMRegionagreements/addenda 100%oftheStates 2023 Signingofagreements/addendawithotherregions 100%oftheStates 2030

2)Makeimmigrationcontrolmoreflexible

GrantingofvisaexemptionsamongallStatesintheSAMRegion


Grantingofvisaexemptionsormoreflexiblevisaprocessingwiththerestoftheworld’scountries


3)Permitforeigninvestmentinnationalairlines

PermissionofSAMRegionaircarrieroperatorstoinvestinmorethana51%shareholding


20222028

Attainmentofagreateropeningtotheinvestmentsofforeignoperatorsuntiltheygraduallyreacha51%share

75%oftheStates 2035

4)Removerestrictionsonthecapacityofairandgroundinfrastructureofthemainairports

ConfirmationthateachairportintheregionhasreceivedtheoperatingplansrecommendedbyICAO(airportoperationalefficiency)


Runwayuseduringpeakhoursnottoexceed70%oftheinstalledcapacity


Outboundpassengerservice:60minInboundpassengerservice:45minIn‐transitpassengerservice:30minCargoservice:4hoursuntilitsdelivery

80%ofthetarget100%ofthetarget

20252030

Attainmentofatotalairportdensityratioof1.0andinternationalairportdensityratioof0.5foreachState


20252030

ImplementationofICAO’sairnavigationPBIP 100%oftheStates 2025 Annualmonitoringoftheairportgrowthplanandactualcapacity

100%oftheStates Asof2019

5)Modernizationofairportprocesses

Self‐servicecheck‐inmodules


20202030

Centralizedbaggagedrop‐offarea 50%oftheStates70%oftheStates

20202025DRAFT

194

Objective Activities Targets Date100%oftheStates 2030

Newsecuritycontroltechnologyusinginternationalstandards(securitymetaldetectorarches,x‐raymachines,etc.)


20252030

Electronicimmigrationsystem(API‐AdvancePassengerInformation)


100%oftheStates

202520302035

Implementationofthecustomsdeclarationalternativesof“somethingtodeclare”and“nothingtodeclare”


20202025

6)Simplificationoftransitsecuritycontrol

SigningofagreementsbetweenSAMRegionStates 50%oftheStates100%oftheStates

20222025

ImplementationoftheOSSsystem(One‐StopsecuritycontrolSystem)


20252030

7)Reductionofchargesand/orexemptionoftaxesonairtransport

Reviewofconsumerchargesandpreparationofproposalsfortheirreduction


20252030

ExemptionfrompaymentofVAToninternationalairfaretickets


100%oftheStates

202520302035

ExemptionfrompaymentofVATonoverflights 100%oftheStates 20228)Controlofairportcharges Reviewofexistingratesandestablishmentofmaximum

charges50%oftheStates100%oftheStates

20222030

Implementationofspecialairportchargesduringhoursoflowflightfrequency


20222025

9)Expansionoftheintra‐regionalroutenetwork

Implementationofspecialairportchargesduringdaysoflowflightfrequency


ConnectionofeachStatewithatleast4otherStatesintheregion(intra‐regionalconnectivityratioof29%)


10)Entryintonewforeigndestinationsandmarkets

Creationofatleast3newdirectroutestonewdestinationsperState

75%oftheStates 2025

HavingatleastonedirectroutewithAsiaandthePacific,theMiddleEast,AfricaandOceania


20302035DRAFT

195

Objective Activities Targets Date11)Jointpromotionofregionaltourismfortouristsfromdistantcountries

Establishmentofanorganizingcommitteeanddeterminationofthedateandvenuefortheeventtopromoteregionaltourism

Participationbyatleast50%oftheStates 2020

Preparationandfundingoftheevent Endoftheactivity 2022 Holdingoftheevent Endoftheactivity 2023

12)Strengthenregionaland/ordomestichubs

Analysisofthetrafficandradiusofinfluence,byairport 50%oftheStates100%oftheStates

20202025

Preparationofinvestmentplanstoguaranteeadequateoperationduringpeakhours


20222028

Consultationwithairlinesinterestedinaconnectioncentre 50%oftheStates100%oftheStates

20222028

ImplementationoftheMasterPlan 50%oftheStates100%oftheStates

20252030

13)Broadentheofferingoflow‐costairlineflightsandroutes

Participationin“Routes”orasimilareventinordertomakepresentationstolow‐costairlines


Arrangementforone‐on‐onemeetingswithaircarrieroperatorsthatshowthemostinterestinoperatingintheregion

Atleast1meetingperState 2021

Entryofatleastonenewlow‐costairlinewithanoperatinglicensethatwouldbroadentheexistingroutenetwork

50%oftheStates 2025

14)Promotesecondaryairports Analysisofthecurrentconditionoftheprincipalsecondaryairports,byStateandcostbenchmark


Reviewandimprovementofexistinglegislationfortheentryandoperationofnewairoperators


Entryofanewlow‐costairlinewithanoperatinglicenseandroutesinatleast1secondaryairport


20252035

15)Establishafavourableregulatoryenvironmentforinterlinepartnershipsandalliances

Reviewandachievementofgreateropennesstoand/orthereductionofobstaclestojointoperatingsystemsandpartnershipsandalliances


ReviewandimprovementofexistingregulationsinordertoallowfortheoperationofofflineairlinesrepresentedbyGSAs

100%oftheStates 2022DRAFT

7 AnnexesAnnex A

Direct non‐stop international routes from airports registered with ICAO

Argentina

Routes AEP Aeroparque (SABE)

ASU Asuncion Paraguay CWB Curitiba Brazil GIG Rio de Janeiro Brazil GRU Sao Paulo Brazil MVD Montevideo Uruguay PDP Punta del Este Uruguay POA Porto Alegre Brazil SCL Santiago Chile UIO Quito Ecuador

COR Cordoba (SACO)

GIG Rio de Janeiro Brazil GRU Sao Paulo Brazil LIM Lima Peru PTY Panama Panama SCL Santiago Chile

EZE Ezeiza (SAEZ)

AKL Aukland New Zealand AMS Amsterdam Holland ASU Asuncion Paraguay ATL Atlanta United States BCN Barcelona Spain BOG Bogota Colombia BSB Brasilia Brazil CCC Cayo Coco Cuba CCS Caracas Venezuela CDG CDG Paris France CUN Cancun Mexico DFW Dallas United States FCO Rome Italy FLN Florianopolis Brazil FOR Fortaleza Brazil FRA Frankfurt Germany GIG Rio de Janeiro Brazil GRU Sao Paulo Brazil IAH Houston United States JFK New York United States LHR London United Kingdom

DRAFT

197

LIM Lima Peru MAD Madrid Spain MEX Mexico Mexico MIA Miami United States MVD Montevideo Uruguay NAT Natal Brazil POA Porto Alegre Brazil PTY Panama Panama PUJ Punta Cana Dominican Republic REC Recife Brazil SCL Santiago Chile SSA Salvador Brazil VVI Santa Cruz Bolivia

MDZ Mendoza (SAME)

GRU Rio de Janeiro Brazil SCL Santiago Chile

RGL Rio Gallegos (SAWG)

PUQ Punta Arenas Chile ROS Rosario (SAAR)

GIG Rio de Janeiro Brazil GRU Sao Paulo Brazil

SLA Salta (SASA)

VVI Santa Cruz Bolivia Total routes 54 21 Countries

Airports 7

Bolivia

Routes LPB La Paz (SLLP)

BOG Bogota Colombia CUZ Cusco Peru IQQ Iquique Chile LIM Lima Peru SCL Santiago Chile

VVI Viru Viru Santa Cruz (SLVR)

AEP AEP B. Aires Argentina ASU Asuncion Paraguay EZE EZE B.Aires Argentina GRU Sao Paulo Brazil IQQ Iquique Chile LIM Lima Peru MAD Madrid Spain MIA Miami United States PTY Panama Panama

Total routes 14 10 Countries

DRAFT

198

Airports 2

Brazil

Routes BEL Belem (SBBE)

CAY Cayenne French Guiana LIS Lisbon Portugal MIA Miami United States PBM Paramaribo Suriname

BSB Brasilia (SBBR)

CDG CDG Paris France EZE EZE B. Aires Argentina LIS Lisbon Portugal MIA Miami United States PTY Panama Panama PUJ Punta Cana Dominican Republic

CNF Belo Horizonte (SBCF)

LIS Lisbon Portugal MIA Miami United States

CWB Curitiba (SBCT)

AEP AEP B. Aires Argentina FLN Florianopolis (SBFL)

EZE EZE B. Aires Argentina FOR Fortaleza (SBFZ)

EZE EZE B. Aires Argentina FRA Frankfurt Germany LIS Lisbon Portugal MIA Miami United States

GIG Rio de Janeiro (SBGL)

AEP AEP B. Aires Argentina AMS Amsterdam Holland ATL Atlanta United States BOG Bogota Colombia CDG CDG Paris France COR Cordoba Argentina DXB Dubai United Arab Emirates EZE EZE B. Aires Argentina FCO Rome Italy FRA Frankfurt Germany IAH Houston United States JFK JFK New York United States LAD Luanda Angola LHR London United Kingdom

DRAFT

199

LIM Lima Peru LIS Lisbon Portugal MAD Madrid Spain MIA Miami United States MVD Montevideo Uruguay OPO Oporto Portugal PTY Panama Panama ROS Rosario Argentina SCL Santiago Chile YYZ Toronto Canada

GRU GRU Sao Paulo (SBGR)

AEP AEP B. Aires Argentina AGT Ciudad del Este Paraguay AMS Amsterdam Holland ASU Asuncion Paraguay ATL Atlanta United States AUH Abu Dhabi United Arab Emirates BCN Barcelona Spain BOG Bogota Colombia CDG CDG Paris France CMN Casablanca Morocco COR Cordoba Argentina DOH Doha Qatar DTW Dallas United States DXB Dubai United Arab Emirates EWR EWR New York United States EZE EZE B. Aires Argentina FCO Rome Italy FRA Frankfurt Germany IAD Washington United States IAH Houston United States IST Istanbul Turkey JFK JFK New York United States JNB Johannesburg South Africa LAD Luanda Angola LAX Los Angeles United States LHR London United Kingdom LIM Lima Peru LIS Lisbon Portugal MAD Madrid Spain MCO Orlando United States MDZ Mendoza Argentina MEX Mexico Mexico MIA Miami United States MUC Munich Germany MVD Montevideo Uruguay

DRAFT

200

MXP Milan Italy OPO Oporto Portugal ORD Chicago United States PTY Panama Panama PUJ Punta Cana Dominican Republic ROS Rosario Argentina SCL Santiago Chile VVI Santa Cruz Bolivia YYZ Toronto Canada ZRH Zurich Switzerland

IGU Foz de Iguazu (SBFI)

LIM Lima Peru MAO Manaos (SBEG)

BLA Barcelona Venezuela CUR Curacao Curacao MIA Miami United States PMV Porlamar Venezuela

NAT Natal (SBSG)

EZE EZE B. Aires Argentina LIS Lisbon Portugal MXP Milan Italy

POA Porto Alegre (SBPA)

AEP AEP B. Aires Argentina EZE EZE B. Aires Argentina LIM Lima Peru LIS Lisbon Portugal MVD Montevideo Uruguay

REC Recife (SBRF)

EZE EZE B. Aires Argentina FRA Frankfurt Germany LIS Lisbon Portugal MIA Miami United States

SSA Salvador (SBSV)

EZE EZE B. Aires Argentina FRA Frankfurt Germany LIS Lisbon Portugal MAD Madrid Spain

VCP VCP Sao Paulo (SBKP)

FLL Fort Lauderdale United States LIS Lisbon Portugal MCO Orlando United States MIA Miami United States

Total routes 112 30 countries

Airports 15

DRAFT

201

Chile

Routes ANF Antofagasta (SCFA)

LIM Lima Peru

IPC Easter Island (SCIP)

PPT Papeete French Polynesia IQQ Iquique (SCDA)

LPB La Paz Bolivia VVI Santa Cruz Bolivia

PUQ Punta Arenas (SCCI)

MPN Mount Pleasant Falkland Islands RGL Rio Gallegos Argentina

SCL

Santiago (SCEL)

AEP AEP B.Aires Argentina AKL Auckland New Zealand ASU Asuncion Paraguay ATL Atlanta United States BOG Bogota Colombia CDG CDG Paris France COR Cordoba Argentina CUN Cancun Mexico DFW Dallas United States EZE EZE B.Aires Argentina GIG Rio de Janeiro Brazil GRU Sao Paulo Brazil GYE Guayaquil Ecuador IAH Houston United States JFK New York United States LAX Los Angeles United States LIM Lima Peru LPB La Paz Bolivia MAD Madrid Spain MDZ Mendoza Argentina MEX Mexico Mexico MIA Miami United States MVD Montevideo Uruguay PTY Panama Panama PUJ Punta Cana Dominican Republic SYD Sydney Australia YYZ Toronto Canada Total 33 19 countries

Airports 5

DRAFT

202

Note: 2016 Alitalia operates non‐stop flights from Rome to Santiago.

Colombia

Routes ADZ San Andres (SKSP)

PTY Panama Panama SJO San Jose Costa Rica

AXM Armenia (SKAR)

FLL Fort Lauderdale United States BAQ

Barranquilla (SKBQ)

CUR Curacao Curacao MIA Miami United States PTY Panama Panama

BGA Bucaramanga (SKBG)

PTY Panama Panama BOG Bogota (SKBO)

ATL Atlanta United States AUA Aruba Aruba BCN Barcelona Spain BLB Balboa Panama CCS Caracas Venezuela CDG CDG Paris France CUN Cancun Mexico CUR Curacao Curacao DFW Dallas United States EWR New Jersey United States EZE EZE B.Aires Argentina FLL Fort Lauderdale United States FOR Fortaleza Brazil FRA Frankfurt Germany GIG Rio de Janeiro Brazil GRU Sao Paulo Brazil GUA Guatemala Guatemala GYE Guayaquil Ecuador HAV Havana Cuba IAD Baltimore United States IAH Houston United States JFK New York United States LAX Los Angeles United States LHR London United Kingdom LIM Lima Peru LPB La Paz Bolivia MAD Madrid Spain

DRAFT

203

MCO Orlando United States MEX Mexico Mexico MIA Miami United States PTY Panama Panama PUJ Punta Cana Dominican Republic SAL San Salvador El Salvador SAP San Pedro Sula Honduras SCL Santiago Chile SDQ Santo Domingo Dominican Republic SJO San Jose Costa Rica SJU San Juan United States UIO Quito Ecuador VLN Valencia Venezuela YYZ Toronto Canada

CLO Cali (SKCL)

ESM Esmeralda Ecuador GYE Guayaquil Ecuador LIM Lima Peru MAD Madrid Spain MIA Miami United States PTY Panama Panama SAL San Salvador El Salvador

CTG Cartagena (SKCG)

FLL Fort Lauderdale United States JFK New York United States MIA Miami United States PTY Panama Panama

CUC Cucuta (SKCC)

PTY Panama Panama MDE Medellin‐Rio Negro (SKRG)

AUA Aruba Aruba BLB Balboa Panama CUR Curacao Curacao FLL Fort Lauderdale United States JFK New York United States LIM Lima Peru MAD Madrid Spain MEX Mexico Mexico MIA Miami United States PAC Panama City Panama PTY Panama Tocumen Panama SAL San Salvador El Salvador VLN Valencia Venezuela

PEI Pereira (SKPE)

PTY Panama Panama Total routes 74 23 countries

DRAFT

204

Airports 10

Ecuador

Routes ESM Esmeralda (SETN)

CLO Cali Colombia GYE Guayaquil (SEGU)

AMS Amsterdam Holland BLA Barcelona Venezuela BOG Bogota Colombia CCS Caracas Venezuela CLO Cali Colombia FLL Fort Lauderdale United States JFK New York United States LIM Lima Peru MAD Madrid Spain MIA Miami United States PTY Panama Panama SAL San Salvador El Salvador SCL Santiago Chile

UIO Quito (SEQM)

AEP AEP B.Aires Argentina ATL Atlanta United States BOG Bogota Colombia FLL Fort Lauderdale United States HAV Havana Cuba IAH Houston United States JFK New York United States LIM Lima Peru MAD Madrid Spain MEX Mexico Mexico MIA Miami United States PTY Panama Panama SAL San Salvador El Salvador Total 27 12 countries

Airports 3

Guyana

Routes GEO Georgetown (SYCJ)

DRAFT

205

CUR Curacao Curacao JFK New York United States KIN Kingston Jamaica MIA Miami United States PBM Paramaribo Suriname POS Port of Spain Trinidad & Tobago PTY Panama Panama PZO Puerto Ordaz Venezuela YYZ Toronto Canada

OGL Ogle International (SYGO)

BGI Bridgetown Barbados Total routes 10 9 countries

Airports 2

French Guiana

Routes CAY Cayenne (SOCA)

BEL Belem Brazil FDF Fort de France Martinique ORY Orly Paris France PBM Paramaribo Suriname PTP Point a Pitre Guadeloupe


Airports 1

Note CAY/PZO ceased operating in 2016

Panama

Routes BLB Balboa (MPMG)

MDE Medellin Colombia BOC B.delToro (MPBO)

SJO San Jose Costa Rica DAV David (MPDA)

SJO San Jose Costa Rica PAC Panama Pacifico (MPPA)

MDE Medellin Colombia SJO San Jose Costa Rica

PTY Panama (MPTO)

MAR Maracaibo Venezuela ADZ San Andres Colombia

DRAFT

206

AMS Amsterdam Holland ASU Asuncion Paraguay ATL Atlanta United States AUA Aruba Aruba BAQ Barranquilla Colombia BGA Bucaramanga Colombia BLA Barcelona Venezuela BOG Bogota Colombia BOS Boston United States BSB Brasilia Brazil CCS Caracas Venezuela CDG CDG Paris France CLO Cali Colombia COR Cordoba Argentina CTG Cartagena Colombia CUC Cucuta Colombia CUN Cancun Mexico CUR Curacao Curacao EWR EWR N. York United States EZE EZE B. Aires Argentina FLL Fort Lauderdale United States FRA Frankfurt Germany GDL Guadalajara Mexico GEO Georgetown Guyana GIG Rio de Janeiro Brazil GRU Sao Paulo Brazil GUA Guatemala Guatemala GYE Guayaquil Ecuador HAV Havana Cuba IAD Washington United States IAH Houston United States IQT Iquitos Peru JFK New York United States KIN Kingston Jamaica LAS Las Vegas United States LAX Los Angeles United States LIM Lima Peru MAD Madrid Spain MBJ Montego Bay Jamaica MCO Orlando United States MDE Medellin Colombia MEX Mexico Mexico MGA Managua Nicaragua MIA Miami United States MSY New Orleans United States MTY Monterrey Mexico

DRAFT

207

MVD Montevideo Uruguay NAS Nassau Bahamas ORD Chicago United States PAP Port au Prince Haiti PBC Puebla Mexico PEI Peirano Colombia POS Port of Spain Trinidad & Tobago PUJ Punta Cana Dominican Republic SAL San Salvador El Salvador SAP San Pedro Sula Honduras SCL Santiago Chile SDQ Santo Domingo Dominican Republic SFO San Francisco United States SJO San Jose Costa Rica SJU San Juan United States SNU Santa Clara Cuba STI Santiago Dominican Republic SXM Saint Martin Saint Martin TGU Tegucigalpa Honduras TPA Tampa United States UIO Quito Ecuador VLN Valencia Venezuela VVI Santa Cruz Bolivia YUL Montreal Canada YYZ Toronto Canada Total routes 78 33 Countries

Airports 5

Nota 1: IQT/PTY route cancelled in 2016.

Paraguay

Routes AGT Ciudad del Este (SGES)

GRU Guarulhos Brazil ASU Asuncion (SGAS)

AEP AEP B. Aires Argentina EZE EZE B. Aires Argentina GRU Sao Paulo Brazil LIM Lima Peru MAD Madrid Spain MIA Miami United States MVD Montevideo Uruguay PTY Panama Panama SCL Santiago Chile

DRAFT

208

VVI VVI Santa Cruz Bolivia Total routes 11 9 Countries

Airports 2

Peru

Routes CUZ Cusco (SPZO)

LPB La Paz Bolivia IQT Iquitos (SPQT)

PTY Panama Panama LIM Lima (SPJC)

AMS Amsterdam Holland ANF Antofagasta Chile ASU Asuncion Paraguay ATL Atlanta United States BOG Bogota Colombia CCS Caracas Venezuela CDG CDG Paris France CLO Cali Colombia COR Cordoba Argentina CUN Cancun Mexico DCA Washington United States DFW Dallas United States EWR EWR New York United States EZE EZE B. Aires Argentina FLL Fort Lauderdale United States GIG Rio de Janeiro Brazil GRU Sao Paulo Brazil GYE Guayaquil Ecuador HAV Havana Cuba IAH Houston United States IGU Iguazu Brazil JFK JFK New York United States LAX Los Angeles United States LPB La Paz Bolivia MAD Madrid Spain MCO Orlando United States MDE Medellin Colombia MEX Mexico Mexico MIA Miami United States MVD Montevideo Uruguay POA Porto Alegre Brazil PTY Panama Panama

DRAFT

209

PUJ Punta Cana Dominican Republic SAL San Salvador El Salvador SCL Santiago Chile SJO San Jose Costa Rica UIO Quito Ecuador VVI Santa Cruz Bolivia YYZ Toronto Canada

Total 41 20 Countries

Airports 3

Chiclayo to Panama, Panama since 2016 Lima to Rosario, Argentina since 2016 Lima to London, United Kingdom since 2016 Suriname

Routes PBM

AMS Amsterdam Holland AUA Aruba Aruba BEL Belem Brazil CAY Cayenne French Guiana CUR Curacao Curacao GEO Georgetown Guyana MIA Miami United States POS Port of Spain Trinidad & Tobago

Total Routes 8 8 Countries

Airports 1

Uruguay

Routes MVD Montevideo (SUMU)

AEP AEP B.Aires Argentina ASU Asuncion Paraguay EZE EZE B. Aires Argentina GIG Rio de Janeiro Brazil GRU Sao Paulo Brazil LIM Lima Peru MAD Madrid Spain MIA Miami United States POA Porto Alegre Brazil PTY Panama Panama SCL Santiago Chile

DRAFT

210

PDP Punta del Este (SULS)

AEP AEP B.Aires Argentina


Airports 2

Venezuela

Routes MAR Maracaibo (SVMC)

AUA Aruba Aruba CUR Curacao Curacao MIA Miami United States PTY Panama Panama

BLA Barcelona (SVBC)

GYE Guayaquil Ecuador MIA Miami United States PTY Panama Panama

BRM Barquisimeto (SVBM)

CUR Curacao Curacao CCS Caracas (SVMI)

ATL Atlanta United States AUA Aruba Aruba BOG Bogota Colombia CDG CDG Paris France CUR Curacao Curacao EZE EZE B. Aires Argentina FCO Rome Italy FRA Frankfurt Germany GYE Guayaquil Ecuador HAV Havana Cuba IAH Houston United States JFK JFK N York United States LIM Lima Peru LIS Lisbon Portugal MAD Madrid Spain MEX Mexico Mexico MIA Miami United States POS Port of Spain Trinidad & Tobago PTY Panama Panama PUJ Punta Cana Dominican Republic SDQ Santo Domingo Dominican Republic

LSP Las Piedras (SVJC)

AUA Aruba Aruba CUR Curacao Curacao

DRAFT

211

PMV Porlamar (SBMG)

BOG Bogota Colombia HAV Havana Cuba POS Port of Spain Trinidad & Tobago

PZO Puerto Ordaz (SVPR)

GEO Georgetown Guyana VLN Valencia (SVVA)

AUA Aruba Aruba BOG Bogota Colombia CUR Curacao Curacao MDE Medellin Colombia PTY Panama Panama


Airports 8

Note: Includes routes that have been temporarily suspended

DRAFT

AnnexB

HistoricaldataontotalpassengersintheSAMRegion,byStateHistoricalinformationabouttotalpassengersin2010‐2015providedbyIATAforeachStatein the SAM Region is provided below, together with the respective annual growth figures.ThattrafficcoversallrouteswithoriginordestinationinagivenState.ItshouldbeaddedherethatthetotalpassengersintheSAMRegionwerecalculatedbasedonthesummationofeachState’sairtrafficadjustedbythecommontraffictoavoidhavingthesamegroupofpassengersattheregionallevelbecountedtwice‐‐inotherwords,passengersrecorded as traffic with one State of the SAM Region as its origin and also as traffic withanotherStateinthesameregionasitsdestination.Listoftheairpassengertraffic–SAMRegion

Argentina;…Brazil;…FrenchGuiana;Panama;….Peru;Suriname;…SAMRegion(OJOigualenelsiguiente),Annualairpassengertrafficgrowthfigures–SAMRegion

DRAFT

Annex C

Airlines that operate direct flights ‐ SAM Region Argentina

1. LATAM Argentina 2. American Airlines 3. Air France 4. Aeroméxico 5. Aerolíneas Argentinas 6. Austral 7. Avianca 8. Sky Airline 9. British Airways 10. Copa Airlines 11. Delta Airlines 12. Emirates Airline 13. VRG Linhas Aereas 14. Iberia 15. LATAM Brasil 16. LATAM Airlines 17. Deutsche Lufthansa 18. LACSA 19. Air New Zealand 20. Boliviana de Aviación 21. Andes Líneas Aéreas 22. LATAM Paraguay 23. Qatar Airways 24. Taca Airlines 25. Turkish Airlines 26. United Airlines 27. Air Europa 28. Alas Uruguay

Bolivia

1. Aerocon 2. Aerolíneas Argentinas 3. Air Europa 4. Amaszonas

DRAFT

5. American Airlines 6. Avianca 7. Boliviana de Aviación 8. Copa Airlines 9. Gol Transportes Aéreos 10. LATAM Airlines 11. LATAM Paraguay 12. Línea Aérea Eco Jet 13. Peruvian Air Line 14. Sky Airline

Brazil

1. Aerolíneas Argentinas 2. Aeroméxico 3. Avianca 4. Air Canada 5. Air Europa 6. Air France 7. Alitalia 8. American Airlines 9. Austral Líneas Aéreas 10. Azul Linhas Aéreas 11. Boliviana de Aviación 12. British Airways 13. Condor Flugdienst 14. Copa Airlines 15. Delta Airlines 16. Deutsche Lufthansa 17. Emirates Airline 18. Ethiopian Airlines 19. Iberia 20. Jet Airways 21. KLM Royal Dutch 22. Korean Air Lines 23. LATAM Group 24. LATAM Brasil 25. LATAM Paraguay 26. Insel Air International 27. Oceanair 28. Passaredo Transportes Aéreos

DRAFT

29. Qatar Airways 30. Royal Air Maroc 31. South African Airways 32. SWISS International Air Lines 33. Taca Airlines 34. TAP Portugal 35. Turkish Airlines 36. United Airlines 37. VRG Linhas Aereas

Chile

1. American Airlines 2. Air France 3. Aeroméxico 4. Aerolíneas Argentinas 5. Avianca 6. Alitalia 7. Copa Airlines 8. Delta Airlines 9. VRG Linhas Aereas 10. Sky Airline 11. Iberia 12. LATAM Brasil 13. LATAM Group 14. Qantas Airways 15. Taca Airlines 16. United Airlines 17. Amaszonas Paraguay

Colombia

1. Aerogal 2. ABC Aerolíneas 3. Insel Air International 4. Air Panama dba Parsa 5. SATENA 6. Avior Airlines 7. American Airlines 8. Air Canada 9. Air France 10. Aeroméxico

DRAFT

11. Avianca 12. Jetblue Airways 13. Copa Airlines 14. Delta Airlines 15. Iberia 16. LATAM Brasil 17. KLM Royal Dutch 18. LATAM Group 19. Deutsche Lufthansa 20. LACSA 21. Spirit Airlines 22. Aero Republica 23. Taca Airlines 24. United Airlines 25. Conviasa 26. Viva Colombia 27. Republic Airline

Ecuador

1. Aerogal 2. Insel Air International 3. Avior Airlines 4. American Airlines 5. Aeroméxico 6. Avianca 7. Jetblue Airways 8. Copa Airlines 9. Delta Air Lines 10. Tame 11. Iberia 12. KLM Royal Dutch 13. LATAM Group 14. LACSA 15. Aero Republica 16. Taca Airlines 17. United Airlines 18. Viva Colombia 19. LATAM Ecuador

Guyana

DRAFT

1. Caribbean Airlines 2. Conviasa 3. Copa Airlines 4. Fly Jamaica Airways 5. Insel Air Aruba 6. Insel Air International 7. LIAT 8. Surinam Airways Ltd.

French Guiana

1. Air Caraibes 2. Air France 3. Azul Linhas Aereas 4. CAIRE dba Air Antilles Express 5. Corsair 6. Surinam Airways

Panama

1. Aerogal 2. Nature Air 3. Air Panama dba Parsa 4. Avior Airlines 5. American Airlines 6. Air France 7. Aeroméxico 8. Avianca 9. Copa Airlines 10. Delta Airlines 11. Aviateca 12. Iberia 13. KLM Royal Dutch 14. Deutsche Lufthansa 15. LACSA 16. Spirit Airlines 17. Aero Republica 18. Línea Aérea De Servicio Ejecutivo Regional (LASER) 19. Air Canada 20. Santa Barbara Airlines 21. Taca Airlines

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22. Turkish Airlines 23. United Airlines 24. Conviasa 25. Viva Colombia 26. Republic Airline

Paraguay

1. LATAM Brasil 2. Aerolíneas Argentinas 3. Air Europa 4. Amaszonas del Paraguay 5. Amaszonas (Bolivia) 6. American Airlines 7. Avianca 8. BQB Líneas Aéreas 9. Copa Airlines 10. Gol Transportes Aereos 11. LATAM Group 12. LATAM Paraguay

Peru

1. Star Perú 2. Aerogal 3. Interjet 4. American Airlines 5. Air France 6. Aeroméxico 7. Aerolíneas Argentinas 8. Avianca 9. Jetblue Airways 10. Copa Airlines 11. Delta Airlines 12. Tame 13. Sky Airline 14. Iberia 15. LATAM Brasil 16. KLM Royal Dutch 17. LATAM Group 18. LACSA 19. Spirit Airlines

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20. Peruvian Air Line 21. Air Canada 22. Taca Airlines 23. United Airlines 24. Air Europa 25. Viva Colombia 26. LC Busre

Suriname

1. Caribbean Airlines 2. Gol Transportes Aéreos 3. Insel Air Aruba 4. Insel Air International 5. KLM Royal Dutch 6. Surinam Airways

Uruguay

1. LATAM Brasil 2. Aerolíneas Argentinas 3. Air Europa 4. Air France 5. Amaszonas (Bolivia) 6. American Airlines 7. Avianca 8. BQB Líneas Aéreas 9. Copa Airlines 10. Gol Transportes Aéreos 11. Iberia 12. LATAM Group 13. SOL Líneas Aéreas

Venezuela

1. Rutas Aéreas 2. Insel Air International 3. Avior Airlines 4. American Airlines 5. Air France 6. Aruba Airlines 7. Aerolíneas Argentinas 8. Avianca

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9. Caribbean Airlines 10. Copa Airlines 11. Cubana de Aviación 12. Delta Airlines 13. Enter Air Spolka 14. Tame 15. Iberia 16. LACSA 17. Aero Republica 18. Línea Aérea De Servicio Ejecutivo Regional (LASER) 19. Aserca Airlines 20. Santa Barbara Airlines 21. Taca Airlines 22. TAP Portugal 23. United Airlines 24. Air Europa 25. Conviasa 26. Aeropostal Alas de Venezuela

Source:IATA,updatedinSeptember2016

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Annex D

Detailed explanation of the calculation of passenger and cargo connectivity indices

a) Passenger connectivity index

This index was constructed considering each State’s actual passenger traffic to its various direct destinations. These traffic flows, however, have not been added up directly, but have been weighted according to their importance within the global connectivity network (available seating capacity).

The index is calculated at the country level and each destination is assigned a value in accordance with its importance; the country assumed to be most connected at the global level, the United States, is given a weight of 1. In the case of the rest of the countries, the total number of seats per kilometer offered is compared with those of the United States; as a result, a country with one‐half the number of seats per kilometer of those offered by the United States would bear a weight of 0.5 and so on successively. Therefore, the formula used to calculate the passenger connectivity index of each State in the SAM Region is as follows:

where Pdn = Number of passengers flying from the State analyzed toward destination n Pen =

Pen=Seatsperkmofferedfromdestinationn SeatsperkmofferedfromtheUnitedStates

In this way, destinations with a larger degree of connectivity with the rest of the world will bear a greater weight than less connected destinations within the valuation. As a result, the connectivity index will have a higher value in the case of States that serve a larger number of destinations and the larger the number of seats per km offered by those destinations to the rest of the world. By way of example, we will calculate French Guiana’s connectivity index according to the following data furnished by IATA:

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Number of passengers on direct routes from French Guiana: Country Number of passengers

CPCounaís Número de pasajeros

Brazil 8,973 France 165,507 Guadaloupe 16,888 Haiti 384 Martinique 93,854 Suriname 2,779 United States 308

Seats per km offered by each country at the global level: Country Seats per km offered Weight vis‐à‐vis the United States

País Asientos por km ofertados

Peso con relación a Estados Unidos

Brazil 3,392,903,688 0.0843 France 4,165,105,681 0.1035 Guadaloupe 58,736,308 0.0015 Haiti 30,891,379 0.0008 Martinique 53,345,304 0.0013 Suriname 19,437,683 0.0005 United States 40,221,233,030 1.0000

Connectivity level of passengers from French Guiana (IC): IC = 8,973 * 0.0843 + 165,507 * 0.1035 + 16,888 * 0.0015 + 384 * 0.0008 + 93,854 * 0.0013 + 2,779 * 0.0005 + 308 * 1 IC = 18 It should be explained that the result of each index is a referential value with significance only if compared with the rest of the indices obtained for each State in the SAM Region. The result does not correspond to any metric in particular, but is an indicator of relativity among States and gives an idea of the differences in level of connectivity in terms of magnitude.

b) Cargo connectivity index

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The cargo connectivity index was prepared using the same logic as that of the passengers. In this case, however, the total tonnes of cargo transported to each destination were weighted considering its GDP as compared with the global GDP. In this way, it is attributed an economic importance in terms of the size of the economies with which the States maintain trading relations. In this case, the following formula was applied:

where Cdn = Total tonnes transported to each destination Pecn =

Pecn= GDP of destination n adjusted by Purchasing Power Parity Global GDP adjusted by Purchasing Power

In this case, the connectivity index will have a higher value for States that transport a larger quantity of tonnes to destinations with significant GDPs at the global level.

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Annex E

IATA passenger projection per State a) Number of passengers (in thousands)

Argentina; … French Guiana …Venezuela *The figures for French Guiana were prepared in‐house within the context of this study; IATA did not project them individually because French Guiana is considered to be a part of France. b) Annual growth assumptions, by State

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…French Guiana…

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