The launch today of domestic services by Norwegian's new Argentinian unit is the latest result of the continued opening-up of one of South America's biggest potential aviation markets, which is now attracting low-cost carriers.
Loosening the regulatory shackles for local operators has already contributed to a sharp increase in airline activity within the region over recent years.
FlightGlobal schedules data shows that airlines are set to lift their Argentinian seat capacity around 7% this year compared with 2017. Capacity is rising nearer 9% in terms of ASKs.
This marks a fourth consecutive year of strong growth. Airlines have raised capacity on routes to and from Argentina around 37% over the last four years.
This has been achieved off the back of the Argentinian government opening up its aviation markets. That work is continuing with news that transport minister Guillermo Dietrich has commissioned industry veteran Agustin Rodriguez Grellet to oversee a working group to carry out reform to the country's aviation law.
"The reality of aviation has changed so much over the last decades, both worldwide and in Argentina, that the government decided that our country needs a new fundamental aviation law to support new developments in the industry and to translate international regulations more swiftly into local law," Rodriguez Grellet tells FlightGlobal.
Rodriguez Grellet is a former ICAO council representative and chief executive of Argentina's air navigation agency EANA.
The Macri administration, which came to power in late 2015, has made progress in eliminating decades of protectionist policies put in place by the populist Kirchner government. These efforts have included rapid removal of entry barriers intended to keep ailing state carrier Aerolineas Argentinas afloat.
As a result, several new airlines are competing domestically and regionally, the country is attracting foreign investment, and low-cost carriers are finally making air travel affordable in a country where their market penetration has been surprisingly low given Argentina's vast geography.
According to Rodriguez Grellet, the new civil aviation act will be the foundation for a new regulatory framework that will allow this "aviation revolution" to continue and make the industry internationally competitive.
Rodriguez Grellet also sees the need for new regulations to make it easier for airlines to operate and manage their fleet. For example, the process to register an aircraft is currently very cumbersome, he points out. Other areas that will be considered include the negotiation of bilateral air service agreements and passenger rights.
With the next presidential elections due in October 2019, Dietrich has established a tight deadline to define and approve the new law, which will be presented to Congress in March next year for approval.
LCC ARRIVALS
Dietrich has already been busy reforming the country's aviation sector. In August, Argentina removed a minimum fare rule, paving the way for low-cost carriers to price their fares freely and further fuelling their development in the market.
Argentina's first low-cost carrier Flybondi has been a driving force behind the change, as it routinely lobbied against minimum prices.
"I would like to sell tickets for Ps200 pesos [$7], but until now the law forced me to sell them for no less than Ps500 [on short routes]," Flybondi chief executive Julian Cook told FlightGlobal earlier this year.
Norwegian Air Argentina has also welcomed the change. "This is excellent news for everyone, as it will contribute decisively to the development of Argentina's aviation market, particularly contributing to the development of the country's interior," said the airline's chief executive Ole Christian Melhus.
The minimum fare rule was originally imposed to protect long-haul bus operators from airlines undercutting their fares. However, high inflation rates combined with the lack of changes to the minimum fares for four years, have rendered the minimum fare rule irrelevant.
There has been increasing interest in Argentina among low-cost carriers, with Chilean operation JetSmart the latest to outline plans.
But local carrier Flybondi is the first to start operations in Argentina, having launched flights in January. The airline's fonder Cook sees potential for 25 million more passengers annually on discount airlines, potentially creating demand for a fleet of 50 aircraft at the carrier.
Cook believes in his advantage as the low-cost pioneer in Argentina. "We are still alone in [new Buenos Aires airport] El Palomar and [have] the privilege to educate Argentinians about how the low-cost business model works for them," he says.
After a challenging start, amid operating restrictions at the newly-opened El Palomar airport which were lifted in April, the airline has expanded its network domestically. It operates a fleet of five Boeing 737-800s, with plans to double the fleet over the coming months.
"We plan to open new destinations from Buenos Aires, Rosario and other bases and start international flights soon," Cook says.
"Our first international destinations will probably be Asuncion in Paraguay, Montevideo and Punta del Este in Uruguay, and we are looking into several options to connect Brazil with Argentina's interior. Rio de Janeiro, Florianopolis and Porto Alegre are potential destinations, and Lima is also one of our high-priority candidates."
The airline has since firmed plans to make its international bow in December, connecting Punta del Este with both El Palomar and Cordoba.
According to Flybondi's initial business plan, the airline will be transporting 10 million passengers annually with a fleet of 28 aircraft by 2022. However, Cook is already looking further beyond.
"There is potential for us to grow by 20 million yearly passengers in the longer term. Once we enter that new phase of maturity, we will order new aircraft to substitute our launch fleet of used aircraft," he says.
"Our current planning predicts our fleet to stabilise at around 50 aircraft in the long term. Flying Boeing now does not mean that we could not buy Airbus [aircraft] in the future."
NORWEGIAN LAUNCH
Flybondi now has company, however. As of today, Norwegian Air Argentina is connecting Buenos Aires Aeroparque with Cordoba and Mendoza. Flights to Iguazu and Neuquen are to follow from 19 November, while Bariloche and Salta services will join the network on 3 December.
The airline will operate twice daily to Cordoba and daily to Mendoza, Iguazu, Neuquen, Bariloche and Salta, with Boeing 737-800s.
Norwegian operates from London Gatwick to Buenos Aires Ezeiza, which means passengers connecting to its Argentinian affiliate's flights have to switch airports in Buenos Aires. With operations spread across different airports, passengers travelling to and from London will have to book domestic Argentina flights separately, says Norwegian.
Norwegian Air Argentina will face competition on all of its its new routes, FlightGlobal schedules data show. It competes directly against Aerolineas Argentinas, LATAM Airlines Argentina and Andes Lineas Aereas on the services to Cordoba, Mendoza, Iguazu, Bariloche and Salta. Aerolineas and LATAM operate from Aeroparque to Neuquen.
Aerolineas also operates from Buenos Aires Ezeiza to Cordoba, Mendoza, Iguazu, Bariloche and Salta. LATAM offers nonstop service from Ezeiza to Iguazu.
"Argentina has enormous potential," states Norwegian's chief executive Bjorn Kjos. "These routes are just the beginning of our plans in South America."
JETSMART EYES MARKET
Chilean low-cost carrier JetSmart will also expand into Argentina in December, and is planning to launch domestic service as soon as mid-2019.
The airline has embarked on the process of obtaining an air operator's certificate in Argentina, and expects to begin sales in early 2019 for flights beginning mid-2019, JetSmart chief executive Estuardo Ortiz tells FlightGlobal.
The domestic service in Argentina will follow the airline's launch of flights to the nation from Chile in December. Five routes are planned. JetSmart began flights in Chile in July 2017.
It will connect Santiago with Mendoza from 11 December, followed by Cordoba on 14 December. Three days after that it will begin service between La Serena and Cordoba. Flights between La Serena and Mendoza will launch on 18 December. In January, a service between Santiago and Buenos Aires El Palomar will begin.
Despite a deluge of airline interest in Argentina following the liberalisation of the aviation industry in the country, Ortiz says JetSmart is bullish about the market.
"It's a large market in terms of population and geography," he says. "We believe that with the recent progress made by the government to remove the fare floor, it will allow us to offer low fares to stimulate the market."
Ortiz sees enormous potential to stimulate demand for air travel in Argentina, pointing to the lower number of trips per capita in the country compared with other, more mature Latin American aviation markets, such as Chile and Colombia. "We see potential for the market to grow two- to threefold," he says.
JetSmart currently operates mostly within Chile, with a lone international route to Lima. It has a fleet of five Airbus A320s but will add another six by early 2019 for a total of 11. In the second half of 2019, it will add eight leased A320neos.
The airline's owner Indigo Partners firmed up an order for A320neo-family aircraft in late 2017, including 70 for JetSmart. Deliveries of these will begin in 2021, says Ortiz.
Supporting JetSmart's move into Argentina has been its reported move to acquire Cordoba start-up Alas del Sur Lineas Aereas.
A notice in Argentina's government bulletin says Alas del Sur has replaced its board members with a group led by Brian Hanna Franke, the son of Bill Franke, managing partner of Indigo.
The move by JetSmart underlines its ambition to move into new markets following its launch in 2017. Alas del Sur, while not yet operational, has secured a number of route authorities from Argentina's regulators.
The start-up has said it plans to begin service by 2022, with a fleet of 12 Airbus A320s and five Boeing 777s.
It has announced an initial network of domestic flights from Cordoba to Buenos Aires Aeroparque, Neuquen, Mendoza, Salta and Bariloche, and plans to serve 25 destinations in 2022.
Reporting by Ghim-Lay Yeo, Graham Dunn and Rainer Uphoff
Source: Cirium Dashboard
