The Notorious B-O-G: Why Bogotá is one of the world’s hottest growth markets

Up and down South America, the news for airlines is bleak. Venezuela has a barely functioning economy. Argentina has a falling currency. And tumbling commodity prices are taking a big toll on the economies of Brazil, Chile and Perú. No wonder LAN (now merged with TAM) is going through one of its toughest times ever. And why Gol is shrinking.

The trends are rather different, however, in Colombia. There, Bogotá is emerging as one of the world’s hottest airline markets, with traffic at its El Dorado airport last year rising by double digits. More specifically, according to Colombia’s civil aviation ministry, passenger counts jumped 11%, cementing Bogotá’s position as South America’s second busiest airport after São Paulo Guarulhos. International traffic alone spiked 14% in 2013. And this year through July, total volumes are up another 8% (6% domestic and 11% international). Now look ahead: in the just-commenced fourth quarter, seat counts at El Dorado will be up a stunning 19% y/y, according to Diio Mi schedule data, and then another 16% the following quarter. This makes Bogotá one of the fastest growing markets not just in Latin America but worldwide. Indeed, only 10 other airports on the planet—a list that includes growth superstars like Dubai and Istanbul—will see more new seats added this quarter.

Colombia as a whole is growing fast. Air traffic nationwide, propelled by dynamic economic growth, surged a massive 16% last year after growing 15% in 2012. The IMF expects the country’s GDP to grow by close to 5% this year (after 4% growth last year), which would make it by far the best performing Latin American economy. Unlike Brazil, Perú and Chile, all of which count China as the top market for their exports, Colombia sends more of its goods to the U.S., whose economy is lurching forward as China’s lurches back. Colombia’s biggest export is oil, whose production is benefiting from an influx of skilled professionals fleeing neighboring Venezuela.

At the center of this boom sits Avianca, an airline that was bankrupt and left for dead barely a decade ago. Today it’s a rising star, one that earned an impressive 9% operating margin in 2013. In fact, of all publicly traded airlines that fly widebodies, only two other airlines worldwide—Japan Airlines and Delta—had higher operating margins (excluding special accounting items) than Avianca last year.

Its success stems from a number of factors. Colombia’s domestic market is large and highly profitable, with multiple population centers like Medellín and Cali not all that distant from Bogotá but hard to reach by…

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