The concept of an “airline” is a familiar one: a single company operates specific aircraft to specific places, either regularly…
Aerolíneas Argentinas to Receive More Subsidies For 2021
Ailing Argentinian flag carrier Aerolíneas Argentinas will receive from the Government the sum of 55.685 billion Argentine pesos (approximately $390 million) to continue its operations throughout 2021.
The transfer was approved late last week by the Minister of Economy, Martin Guzman, who ratified the projections of the airline’s performance for the year and signed off on the funding, newspaper La Nacion reported.
Bleeding Money Since Nationalization
The company is now running as a state-owned entity under the supervision of the Ministry of Transport after it was nationalized in 2008. Since then, the company has been operating at a loss every year and needs to receive state subsidies in order to continue flying.
The year 2020 was obviously not an exception: with international traffic grinding to a halt due to the decision of the government to suspend all international flights in and out of the country between March and October, Aerolíneas Argentinas was transferred $638 million, plus contributions to the payment of social charges that bring the total tally to over $650 million.
Data from the Ministry of Transport and the Civil Aviation Authority suggest that, during the past 10 years, the airline has received over $5.4 billion in public funds to finance its losses, but nonetheless it still keeps employing 11,868 people, including almost 2,500 maintenance employees and over 2,000 cabin crew to operate a fleet of 80 aircraft, 70 of which are narrowbodies.
More Money Than Some Ministries
The public funds destined to keep Aerolíneas Argentinas alive represent more than 68% of what is being earmarked to finance the entire judicial system in the country. The airline receives more money from the government than Federal Police, Naval Prefecture, Gendarmerie as well as significantly more than the entire budget for the Ministry of Science, Technology and Innovation.
Also, the cash injection represents more than double what the government is going to spend on the entire penitentiary system.
A Merger and Fewer Competitors
During the worst year on record for commercial aviation, the government merged the two state-owned carriers, Aerolíneas Argentinas and Austral, into one company, and due to the impossible market conditions, foreign competitors that had entered the market hoping to take advantage of a weak local incumbent all decided to leave Argentina – LATAM Argentina and Norwegian Air Argentina both left the competitive arena.
Restrictions on flying are still very tight in Argentina, to the point where private carriers Flybondi and JetSMART, albeit still technically operating, are transporting only 1% of the nation’s passengers. Therefore they do not represent a threat to Aerolíneas Argentina like LATAM and Norwegian did during their operations in Argentina.
Aerolíneas is therefore once again in a monopoly situation for the first time since the market was opened to foreign competitors in 2016. Now all the competitors are gone, but it remains to be seen whether the carrier will manage to stop decades of losses and find its way to profitability.
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