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Argentina’s Commercial Aviation Revolution Has Become a Total War
Amidst the classic and expected political turmoil that takes center stage every election year, the commercial aviation market is one key topic in both government and opposition parties in Argentina.
It is no surprise for any of the actors that the liberalization of the domestic offering is a battleground of its own, as the measures taken by Mauricio Macri’s administration differ completely from the scenario left by the former president, Cristina Fernandez.
Policy Changes Spur Growth in Travel, Adjusted Airline Strategies
Led by the Minister of Transportation, Guillermo Dietrich, the transformation included the addition of a third airport in Buenos Aires metropolitan area, tailored for low-cost carrier operations. To this date, more than a million passengers arrived or departed from Palomar, either by Flybondi or JetSmart.
Another major change was the elimination of airfare minimums, which set in motion a full price war and significantly lowered the average ticket price in the domestic market. Passenger numbers have continued to rise as new players gain market share each month. However, the path to modernization hasn’t been easy to walk.
Along with a steep peso devaluation and a severe recession, fast growth plans were quickly abandoned by the carriers. Flybondi scratched off the idea of finishing its first year of operations with a 10-aircraft fleet, instead opting to only renew its fifth aircraft with an ex-Jet Airways Boeing 737-800. Norwegian Argentina is flying four aircraft for the moment, as one of its Boeing 737-800 aircraft has returned to Europe to cover the gap left by the Boeing 737 MAX grounding. New routes are being announced every other week, but carriers rather tweak frequencies of other destinations than expand the fleet. Perhaps the clearest hint that times are changing: no more eternal routes and flights to a destination. Demand rules.
Avianca has ceased to operate in Argentina in part as a consequence of the local economic landscape, as well as being severely damaged by Avianca Brasil’s demise. Synergy’s frontman Efromovich is now looking to buy a part of Alitalia, as its previous venture is on the verge of liquidation.
Presidential Race Reignites Debate
Within all of these complex scenarios, last Monday was set as the official kick-off for the presidential race. Next August’s primaries will show the strengths and weaknesses of the candidates and what local Argentinians can expect for October’s general elections. In this broad scenario, each party is eager to gain support or at least, to weaken the rival. In our particular aviation market’s tiny pool, there’s blood in the water.
On July 5, unions that oppose the changes led by the government held assemblies at the beginning of the operation day, forcing to cancel and delay a good amount of flights. While legally is not considered a strike, the in-place meetings are an ancient de facto disruption of the operations. This time, the unions simply expressed the opposition to the government’s strategy, rather than offer a concrete claim.
On the other hand, the turmoil has been used for the carriers’ own agenda: LATAM Argentina, the local branch of the Chilean-Brasilian holding, doubled down the pressure on authorities to grant the aircraft interchange, which would allow the carrier to operate non-Argentinian registered aircraft with local crews.
The justification is pretty simple: both Boeing 767 aircraft that LATAM Argentina has under its registration need to be updated to include ADS-B Out transponders, mandatory to fly to the US beginning on January 1, 2020. The company has declared that both aircraft have been operating for more than 20 years and it makes no practical sense to upgrade them when there is a 767 fleet ready to operate and with retrofitted cabins. While this reason seems appropriate, it is clear that is just the spearhead of a legislation change that can be used by many others, and in many other ways.
This request is supported by JURCA, the association of airlines operating in Argentina, but heavily resisted by unions. It has even created a fracture within the pilot groups, as some LATAM crews are requesting its union representatives to ease the opposition to aircraft interchange, as the risk of not reaching an agreement by the end of the year would imply the closure of the airline’s Miami route.
There is no definitive decision on the matter yet. While information continues to unravel, the perception is that the positions are not going to reconcile any time soon and that the virulence is increasing. Traversed by the presidential race, Argentina’s “commercial aviation revolution” is rapidly becoming a total war. Perhaps it is time to pick a side.
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