- American Airlines is facing numerous setbacks in South America.
- Rising COVID-19 cases in Chile, Brazil, and Peru forced the airline to cut flights in April.
- Civil unrest and protests in Colombia are now further threatening success in the region.
- See more stories on Insider’s business page.
American Airlines’ expansion strategy in South America is experiencing a seemingly never-ending stream of hurdles.
Tourism-dependent Latin America was among the first regions to welcome US tourists during the coronavirus pandemic, and American was standing ready to fly eager travelers. Earlier in the year, the airline had announced new flights to cities in Chile, Colombia, and Brazil in a bid to attract leisure flyers as it waited for business travel to recover.
But while the continent appeared to be welcoming at first, doing business in South America quickly proved problematic.
Flights to Santiago, Chile, were among the first to be impacted when the country closed its borders for the month of April. American had planned to launch a new non-stop route from New York using one of its largest aircraft, the Boeing 777-200, on May 7.
Chile appeared promising when it opened to Americans in November 2020. But a spike in COVID-19 cases following the country’s summer season prompted the government to once again close its borders to tourists.
The state of emergency in the country planned for the month of April has now been extended through June, according to the US Embassy in Chile. American, as a result, pushed back the launch of its inaugural New York-Santiago flight to July 2; though, Chile may extend its border closure depending on conditions in the country.
Spiking COVID-19 cases were also the reasoning for flight reductions to Brazil and Peru, the airline confirmed to Insider’s Brittany Chang in April. Both countries still allow US citizens to enter despite the rise in cases, according to the US Embassies in Brazil and Peru.
In Colombia, however, American faces a new challenge: civil unrest. Protests have gripped the country with some turning violent and taking the lives of at least 26 people, according to ABC News. The Washington Post Editorial Board is also predicting that Colombia’s levels of unrest could spread to regional countries, like Peru.
American, in response, has issued a travel alert for the Colombian city of Cali, where the protests have been the most extreme, allowing travelers to change their flight to any day between May 4 and May 18.
The protests could discourage future travelers from booking trips to Colombia or encourage flyers with existing bookings to change away from Colombia at a time when American is deploying some of its largest aircraft to the country.
Rebuilding a lost South American network at the wrong time
American’s desire to grow in South American comes as the airline seeks to rebuild following the loss of a partner in LATAM Airlines prior to the pandemic.
Delta Air Lines spent $1.9 billion in 2019 for a 20 percent stake in LATAM, significantly growing its presence in South America. The move saw LATAM drop American and the Oneworld airline alliance to join Delta and the SkyTeam airline alliance, leaving American to rebuild in a historically profitable region.
“Latin America has, for roughly 30 years now, been one of American’s international beachhead,” Henry Harteveldt, travel analyst and cofounder of Atmosphere Research Group, told Insider. “In fact, it’s been American’s most successful region outside of the US.”
With LATAM gone, American was left with Brazil’s GOL Linhas Aéreas, a limited partner in the region. But GOL didn’t have the reach of the larger airlines that were now aligned with American’s competitors.
Delta bought a new partner in LATAM Airlines alongside its existing partner in Aerolíneas Argentinas while United had Avianca and Copa Airlines. To regrow its South American network, American chose to launch new routes from the US with a domestic partner, JetBlue Airways.
American launched its routes to Colombia, Brazil, and Chile in a partnership with JetBlue dubbed the “Northeast Alliance.” For American, the partnership provides access to customers across JetBlue’s network that can connect onto the new routes.
“It’s understandable that American would be eager to start rebuilding its network in Latin America because it is so strategically important to the airline right now,” Harteveldt said.
Ceding Europe to United and Delta, for now
South America isn’t totally lost for American as the airline still operates around 30 daily flights to cities across the continent. Cirium data also shows a steady stream of cargo-only flights operating to Santiago from Miami in 2021, which Harteveldt says helps stem the losses.
But while American focuses on South America, its competitors are locked in on the reopening European continent. United and Delta were both quick to resume flights to European countries open to Americans like Greece and Iceland while also starting new routes to Croatia.
“I think American is looking at this and saying, ‘we’re going to be very careful about which routes we pick and which battles want to fight,'” Harteveldt said, thinking back to 2018 when American launched Iceland flights alongside Icelandair now-defunct Wow Air with flights to Dallas. But the airline hasn’t completely ignored Europe, nor a gradually reopening Middle East.
A new route between New York and Athens, Greece, is scheduled to launch on June 2 and existing routes to Athens from Chicago and Philadelphia will resume in June and August, respectively. The airline also just launched a new route between New York and Tel Aviv, Israel, with plans for another route to Israel from Miami, which may pay off as the Middle Eastern country starts to accept vaccinated tour groups.
American may also be waiting for the European Union to open its doors to US citizens, Harteveldt says, so the airline can fly more passengers on its traditional routes to cities like Paris, France; Madrid, Spain; and Rome, Italy.
But success in South America remains challenging as new and unexpected roadblocks appear that are outside of the airline’s control.
“It’s not American’s fault, for example, that you had a strong surge of virus in a particular country, Harteveldt said. “It’s not American’s fault that travel restrictions are in place when American may have thought that some of these restrictions would have been eased or removed.”