Published On: Mon, Jun 23rd, 2014

InselAir is poised to become second largest airline group in Caribbean

Insel Air fokker 50WILLEMSTAD - InselAir has already quietly become the fourth largest Caribbean airline group. The group currently has about 31,000 weekly seats, putting it only behind market leader Caribbean Airlines (which took over Air Jamaica in 2011), LIAT (a regional carrier focusing on the intra-island market and owned by several Caribbean governments) and Bahamas Air.

As InselAir further expands in 2H2014, with several new routes likely from Aruba and additional capacity from Curacao, the group could overtake both Bahamas Air and LIAT to become the second largest Caribbean player.

InselAir also has been consistently profitable while most Caribbean airlines have remained in the red. InselAir has even been able to work around the currency challenges in Venezuela which particularly impacted its biggest rivals, DAE and Tiara.

Venezuela is an important market for InselAir, accounting for about 25% of the group’s capacity. But Mr Kluyver says InselAir was recently able to conclude a deal with the Venezuelan government which will allow the group to receive from the Venezuelan government the funds held based on its ticket sales in Venezuela from 2013.

IATA has estimated the Venezuelan government owes foreign carriers serving the country about USD4 billion. Several carriers such as Alitalia andAir Canada have dropped services to Venezuela while others such as Panama’s Copa have cut back significantly in order to reduce exposure to Venezuela. Most recently American announced plans to cut its capacity to Venezuela by almost 80% until the issue over currency controls can be resolved.

A potential competitive advantage arises as InselAir is one of only a few airlines (all from the Caribbean or Latin American) which have come to an agreement with the Venezuelan government. The group does not see Venezuela’s currency controls as a threat or potential future stumbling block to its planned expansion, as it is confident it will always eventually get the money from tickets sold in Venezuela.

InselAir relies heavily on connecting traffic

As other carriers cut capacity to Venezuela, InselAir is likely to grow its share of the Venezuela-US market. Flights from Miami to Curacao are timed to connect with flights from Curacao to Caracas and Valencia. The group’s new Miami-Aruba service also connects with Aruba-Caracas and Aruba-Valencia.

The Miami-Venezuela market has been an important niche for InselAir as well as other Caribbean carriers. Overall transit traffic is an integral part of InselAir’s business as the local ABC market is relatively limited. InselAir says its Curacao hub now handles about 300,000 transit passengers per year.

Suriname and now Guyana are also only viable because of the connections to Miami. InselAir is also increasingly targeting South America to Caribbean connections. While South America-North America is a much bigger market, South America-Caribbean is a growing market that is relatively under-served.

The ABC islands are ideally located for South America-Caribbean traffic as they are the closest Caribbean region to South America. InselAir estimates it has an 11% share of the South America-Caribbean market, making it the largest carrier in this market after Panama-based Copa.

Connections within the Caribbean also have grown in importance as the group adds more regional destinations such as Punta Cana. InselAir estimates that it also now has an 11% share of the intra-Caribbean market, making it the third largest player after American and LIAT.

InselAir has succeeded where others have failed

InselAir has expanded rapidly since its 2006 launch and has grown during a period in which several Caribbean carriers have shrunk in size, been bought out by bigger airlines or exited the market entirely. The group is now the largest carrier in the Dutch Antilles and is one of the leading carriers in the entire Caribbean.

The InselAir Group currently accounts for a 62% share of current seat capacity at its original home market of Curacao and a leading 19% share in the more fragmented Aruba market, according to CAPA and OAG data. In much smaller Bonaire InselAir’s current capacity share is 56%.

The group only has about an 8% share of seat capacity in Saint Maarten, but this will change once it turns its attention to establishing a third base (InselAir Saint Maarten is expected to be established once InselAir Aruba is fully up and running). Saint Maarten is another highly fragmented market with market leaders LIAT and Saint Maarten-based Winair accounting for only 15% capacity shares. Winair is already InselAir's only partner carrier from the Caribbean (the group also has three codeshare or interline partners from Europe and three from South America).

The Caribbean remains a very challenging market but InselAir seems to have carved out a successful and growing niche. InselAir has clearly benefitted from consolidation and market rationalisation, positioning it strongly to pursue further expansion and continue its emergence as one of the leading airline groups in the Caribbean.

Source: CAPA

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