The norm when a market has reached its peak is to look elsewhere. Especially in aviation, when the move can be financially justified in the long term, expanding to foreign markets in a same region is the next step when thinking globally down the runway. It’s a step Chilean low-cost carrier Sky Airline is willing to take, in fact as soon as 2019. Furthermore, long-term projections express that 75% of the firm’s consolidated revenue will come from these external operations.
The target markets? Peru, Colombia, Argentina and smaller markets such as Paraguay, Ecuador and Bolivia. During 2017 Sky became the first Chilean carrier to operate under a low-cost model to Argentina, although it has yet to operate inside the neighbour country. “We operate under international standards and have reached the needed maturity to explore foreign markets. The question is when rather than if”, stated Holger Paulmann, CEO of Sky Airline.
An endeavour of this magnitude calls for a robust financial plan that accounts for local regulations, limitations and opportunities. The pursue for financial partners has already begun, with the need to find associates willing to invest at least 30%, which in countries like Peru is the minimum. Another option the company is weighing is to acquire smaller local airlines, although they acknowledge that both models can coexist. Initial projections, conditional to the size of each market, estimate the need to invest between US$ 50 million to US$ 75 million to start. And Sky Airline’s aim is to get local partners to invest a fraction of that quantity.
What about the elephant in the room called Brazil? “We have no intentions to operate in Brazil. We will fly to Brazil, but without the plan to establish a hub. It’s easier to maintain the same corporate culture in countries that speak the same language, being aware that the challenge of potentially having more than one culture finally changes the organisation’s core. There’s a huge opportunity to develop our business model in the Spanish speaking countries in the region, and we will explore this option entirely”, said Paulmann.
But Sky Airline does not forget about the Chilean market. They plan to grow between 75 and 80% during the next three years, 19% alone during 2017, and will finalize this year with a total of 3,8 million passengers transported (18% international). The aim is to reach the five-million mark by 2020. “This year we will obtain a market share of 27,5%, but we aspire to hit 30% at the end of the decade with a sustained, healthy and responsible growth”, concludes Holger Paulmman, Sky Airline’s CEO.
Sky Airline is based at Santiago International Airport and operates 17 local destinations and international routes to Argentina, Bolivia, Brazil, Peru and Uruguay. With a fleet of 15 aircraft (13 A319-100 and 2 A320-200), Sky successfully shifted from a legacy carrier to a low-cost business model in March 2017, establishing itself as the first full budget airline in Chile.