The Peruvian Government is aiming to create a new low-cost state-owned carrier under the name of Línea Aérea de Bandera del Perú or LAPERU. If the project pans out, it would become the first low-cost state-owned airline in the world. But, would it be fair to other airlines in the country and South America?
What’s the project?
To launch this new airline, the Peruvian Government is looking at a US$75 million investment. The Government would own 35% of LAPERU, while a mix of private investors would hold the rest of the airline’s shares.
Several domestic airlines are currently operating in Peru, like Viva Air Peru, Sky Airline, LATAM Peru, and Avianca Peru. JetSMART was recently considering launching a branch in the country. But, as you can see, not one of these airlines is actually Peruvian. Viva Air is based in Colombia, Avianca in Panama (although it is of Colombian origin), LATAM in Chile and Brazil, and JetSMART in Chile.
Peru used to have its own airlines, like LC Peru and Peruvian Airlines. After years of losing market share to foreign competitors, both ceased operations in 2018 and 2019, respectively. The Peruvian Government is aware of that. In a document seen by Simple Flying, it wrote,
“In the last two decades, the airlines that used the international air routes of Peru, with revenues and sales of billions of dollars, didn’t invest in Peru (...). They worked as branches of airlines with origins in other countries where they sent all their financial revenues.”
The Government added that some of these airlines, like Avianca Peru, doesn’t even have airplanes registered in Peru.
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Why would launching a low-cost make sense?
The Government aims to have an airline that provides air service across Peru with low fares that help the Peruvian society.
It also plans to promote Peru’s tourism by signing codeshare agreements with airlines from other countries. LAPERU will work as a low-cost carrier because it aims to create an essential service, transportation.
“Peru’s State carrier can offer a service that satisfies the need of million people of moving from one place to another with the best low-cost fares, without having to pay for ancillary services that have no value for them,” the Government said.
The project is far from a done deal. There is no more information regarding possible routes, hubs, or even fleet. Considering how low-cost airlines mainly operate in Latin America, we could expect to see an Airbus A320 family fleet for LAPERU. We could also expect it to fly out of Lima International Airport and other main cities like Cuzco and Trujillo.
Is a state-owned low-cost carrier fair to other airlines?
Meanwhile, not everyone is happy with the news. The International Air Transport Companies’ Association (AETAI in Spanish) recently said there’s no space for a state-owned low-cost carrier. Albeit, the AETAI is managed by LATAM, so take its arguments with a pinch of salt. Carlos Gutiérrez, CEO of AETAI said,
“Is the objective create more competence? The Peruvian market has five airlines that participate actively and already has two low-cost carriers that have been growing recently. I see no point in launching the airline.”
He warned the Government against repeating mistakes from the past. In the last century, Peru had other State carriers like Aeroperú and Tans Peru, and both ceased operations due to awful management. AeroPerú had annual net losses of US$24 million between 1991 and 1992. Tans Peru had two fatal accidents before closing.
Finally, ComexPeru said that a State low-cost carrier would increase airfares in the country. This association said that other airlines would leave the country if this project is made, which would decrease the offer in Peru.
What do you think? Would a State low-cost carrier be a good idea? Let us know in the comments.