Christmas has come early this year for collectors and aviation enthusiasts. On Monday, CNN reported that British Airways announced it…
The Buenos Aires Aeroparque Slots Saga
Argentina’s commercial aviation market is impacted by a myriad of factors that have little, if anything, to do with commercial aviation. One of the best examples of this is the story of two companies – or three, or four – and the slots at the country’s main domestic airport: Buenos Aires’ Aeroparque.
In 2016, Mauricio Macri’s government launched an ambitious plan to revamp commercial aviation in Argentina. The plan was named “Revolution of the Planes,” and it sounded too good to be true: incentivize new competitors, new routes, more companies and more direct and indirect jobs in one of South America’s most underdeveloped domestic networks. At that time, three companies controlled Argentina’s aviation market: Aerolíneas Argentinas/Austral, LATAM Argentina and Andes Líneas Aéreas. In reality, Aerolíneas and LATAM Argentina controlled a large majority of the market, while Andes took a small portion with charters and some specific and sporadic regular routes.
But one day, Flybondi announced that it would start operations, followed by Norwegian Argentina, then Avianca Argentina, one of German Efromovich’s last attempts of growth for Synergy. JetSMART, a local branch of the Chilean subsidiary of Indigo Partners, arrived a little later. Several other companies existed only on paper. For one of those paper airlines, Alas del Sur, business was good; to avoid the necessary public hearings to obtain routes, JetSMART bought Alas del Sur’s route authorizations.
Fast forward to 2018. The Revolution of the Planes showed its first signs of weakness, but the program still decided to complicate things by eliminating the price bands that provided a certain competition level among carriers. In the middle of a steep devaluation of the Argentinian Peso, a fierce price war between low-cost operators and legacy companies ensued, and there was no clear winner – just a leveled ground and several casualties. Carriers were faced to choose between offering fares that made financial sense, not selling seats and being left out of the market or offering ridiculously low prices and sinking an inch with every ticket sold. Many chose the latter for competition’s sake.
A year later, the situation was dire. Avianca Argentina ceased operations in 2019, another abrupt Peso devaluation occurred and Norwegian Air, which owned Norwegian Argentina, changed its CEO. The loss of subsidiaries that prevented financial ruin was a matter of time. In December 2019, JetSMART Argentina announced that it had bought Norwegian Argentina, with its staff, routes and its most valuable asset: operating slots at Buenos Aires’ Aeroparque . JetSMART also began operating from Palomar airport, a military base that was converted to a low-cost terminal for LCCs like JetSMART Flybondi. Norwegian focused on the service segment, setting its base in Aeroparque to attract business travelers.
Both companies signed an agreement allowing JetSMART to take over all rights in Aeroparque; two days later, Argentina’s national aviation authority, ANAC, approved the agreement without observations, per aviacionline. The agency’s speed was interesting, but there was a reason: the agreement was signed on December 4, the approval was announced on December 6, and a new president took office on December 10. According to the agreement, operations would merge into one brand on March 20, 2020. But a small detail complicated things even further. In February 2020, when JetSMART asked Aeropuertos Argentina 2000 for formal authorization to move its base to Aeroparque, the airport operator said no.
AA2000 refused JetSMART’s request since “there were changes in government and public policies” and that the matter required “further investigation,” per aviacionline. JetSMART protested and filed a complaint, deeming the resolution as “arbitrary.” Courts sided the carrier and ordered the airport operator to allow JetSMART to start operations in Aeroparque, but there was another twist nobody could have imagined.
Last Friday, ANAC gave JetSMART 15 days to present all documents pertaining to the original agreement for Norwegian’s purchase for a new review, per aviacionline. The same authority – under new management – is having second thoughts on the acquisition approval it gave in December, and the future of the whole deal is in jeopardy. In addition, all this discussion is being held while there are no regular flights, and there is no certain date for resuming operations. Aeroparque is also closed for renovations at least until next December. A year after that day both JetSMART and Norwegian thought they were sealing the deal, it all may fall apart. An unexpected surprise ending for a saga, in a country that deep down, it is not surprising anyone.
- British Airways Chief Alex Cruz Steps Down - October 12, 2020
- United Resumes Nonstop Service to Shanghai - October 5, 2020
- Qatar Airways Reports $2 Billion Loss for Year Ended March 31 - September 28, 2020
In March 2019, the Federal Aviation Administration (FAA) grounded the Boeing 737 MAX aircraft after two fatal crashes that killed…
Goldman Sachs often invites executives from various industries for talks. This has been going for quite some time now, so…