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An Aerolineas Argentinas 737 MAX 8 (Photo: AirlineGeeks | Pablo Diaz)

Aerolineas Argentinas Adjusts its Strategy, Prepares for a Fierce Domestic Battle

Last week, Aerolineas Argentinas’ CEO, Luis Malvido, presented the company’s strategic plan for the next three years. The four pillars on which the strategy is based are sustainability, the development of the network, excellence in service, and adherence to processes and transparency; all under the umbrella of security as an essential value of the operation.

As the challenges of Argentina’s economic situation and the appearance of new players,  eight critical objectives emerge from the four pillars: to increase revenues, to increase fleet efficiency, to gain competitiveness by addressing costs, to increase the efficiency of human capital, to improve commercial competitiveness, to improve the overall travel experience, and to evolve towards becoming a digital company.

These objectives are translated into 18 initiatives, which will be reflected in 66 projects where execution is starting immediately.

In relation to the context in which the plan is presented, Malvido said: “The market scenario in Argentina has changed and puts us under pressure to gain competitiveness and continue to be chosen by our passengers and customers, but also to improve the way we do things; this is the main goal, because it is up to us to maintain our leadership in the market. ”

It is true that Malvido has been brought in just last July, but it is also fair to state that the market itself is not remotely the same when compared with his first days at the job. The steep Argentine Peso devaluation has severed the possibilities of many travelers to go abroad, which will forcibly strengthen the domestic market for the upcoming summer vacations. In a context where Aerolineas is struggling to maintain its widebody fleet between the necessary numbers to keep it current international routes afloat, the relieved pressure for long-haul flights may come as good news.

But in the domestic market competition is becoming fierce after the national government removed the fare bands and a price war has begun. While Flybondi still struggles with its own deficiencies, with an aged fleet and an overextended network, a new player has just stepped in: Norwegian Argentina has started operations, and will quickly ramp up to be a significant player in the market by 2019.

Another player with deep pockets is JetSmart, who will start flying domestically by mid-2019, financially supported by Indigo Partners. While state-owned Aerolineas has abandoned the zero-deficit goal for the moment, its former CEO Mario Dell’ Acqua so firmly established, the dilemma seems to be how to balance the austerity several political sectors demand with the financial flexibility the carrier will need to cover the expenses while maintaining cheap fares in order to remain competitive.

If anything, the Argentinian market has grown to resemble the conditions that exist in India, where traditional carriers need to adapt fast or go bust in a scenario in which the price of a ticket is so low that companies will soon start to prefer that nobody buys one.

Pablo Diaz
Pablo Diaz
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