The Latin America Aviation Market was valued at USD 6.2 billion in 2020 and is projected to reach USD 9.54 billion in 2031 with a CAGR of 5.76% during the forecast period (2022-2031).
The outbreak of COVID-19 in 2020 had a major impact on the aviation industry in Latin America, as the demand for air travel dropped and airlines are forced to cut down their capacity. This has resulted in significant losses for the airlines in the region. However, the demand for domestic travel and cargo movements and the growth of low-cost carriers in the region is acting as a major driver for the revival of the aviation market in Latin America.
Despite the slow-growing economy of the region and the economic impact of the COVID-19 pandemic, countries in Latin America are planning to modernize their military aircraft fleet to strengthen their armed forces. This is expected to drive the military aviation sector in the country during the forecast period.
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The privatization of airports in countries like Brazil, Jamaica, Honduras, Paraguay, and Peru, is expected to develop the airport infrastructure and enhance capacity, thereby supporting the growth of the general aviation market in the region.
Key Market Trends
Commercial Aircraft Segment to Grow with the Highest CAGR During the Forecast Period
The commercial segment of the Latin American aviation market is anticipated to register the highest CAGR during the forecast period. Though the travel restrictions amid the COVID-19 pandemic have affected the revenues of the airlines in the region, Boeing has projected a demand for 2,610 new aircraft in the region over the next two decades. Narrow-body aircraft is expected to comprise 90% of this demand, reflecting the growing demand for affordable air travel across and within the region. Avianca and LATAM Airlines Group, two of the largest full-service carriers in the region, are currently restructuring their fleet and strategies to return to profits. These airlines are also adding back capacity in markets like Brazil and Colombia which are recovering at a comparatively better pace. In addition, LCCs in some countries in the region are also continuing to add back capacity at a faster rate, which is also expected to drive the market. Though some airlines have decided to defer their aircraft deliveries, much of the aircraft ordered are not canceled. As the passenger traffic is growing, major airports in the region are undergoing renovation projects to increase their passenger and aircraft handling capacities. For instance, the Argentine government announced plans to invest USD 750 million in the expansion of Ezeiza International Airport. The renovation of the airport may help it accommodate four times the number of aircraft than the current capacity. In Latin America, to boost the number of air passengers, commercial airlines are providing attractive services, like free checked baggage, competitively priced fares, and new routes. In addition, the exponential growth in e-commerce in recent months is also expected to propel the airlines to increase their cargo aircraft fleet, thereby driving the growth of the segment during the forecast period.
Brazil is Expected to Dominate the Market During the Forecast Period
As of 2020, Brazil had the highest market share in the Latin American aviation market. Brazil is one of the booming markets in the commercial aviation industry globally. The country is also one of the top 15 military spenders in the world. In the past few years, the Army and the Navy of Brazil received funds to replace their aging aircraft fleet. Brazil signed a contract with Saab AB to acquire 36 Gripen NG fighter aircraft for the Brazilian Air Force, worth USD 5.4 billion. The contract was signed in October 2014, with deliveries planned to run through 2024. As of July 2020, Brazil has officially begun manufacturing the jets at its new local facility. The Brazilian Air Force has a total of 28 C-390 Millennium multi-mission medium airlifters on order, of which 4 aircraft were delivered as of December 2020. In 2020, as a result of the fall in demand and mounting losses for the airlines in the country, airlines have deferred their aircraft orders. In May 2020, Azul Airlines reached an agreement with Embraer to postpone the initial deliveries of 59 Embraer E195-E2s from 2020 to 2024.
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However, airlines like LATAM Brasil and GOL have a strong order book, which is expected to drive the market. Brazil has a strong domestic demand, which is expected to drive the recovery of the aviation industry in the country. In December 2020, GOL Airlines announced that it will resume flying the Boeing 737 MAX in its domestic network. GOL Airlines has orders for 95 737 MAX aircraft to replace its NGs, scheduled for delivery in 2022-2031. To improve the infrastructure for air travel across the country, the Government of Brazil announced its plan to privatize several airports in the country. The ongoing investments in airport infrastructure and the strong domestic commercial airline demand in the country are propelling the growth of the aviation market in Brazil.
Some of the prominent players in the Latin American aviation market are Embraer SA, Airbus SE, The Boeing Company, Bombardier Inc., and Lockheed Martin Corporation. After the cancellation of the planned purchase of Embraer’s commercial aircraft to Boeing, Embraer has announced in November 2020 that it will not sell its commercial aircraft division. Also, the cancellation of another joint venture for KC-390 military tactical airlifter has resulted in Embraer losing the sales network of Boeing and a potential entry point into the US military market. However, the company is looking for partners on aircraft programs. The aviation market in Latin America has huge potential for growth and can provide huge opportunities for aviation industry players to expand their presence during the forecast period.
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