Despite being Latin America’s second biggest country, Argentina never figured in the growth plans of the region’s airlines until recently when a new government took charge in late 2015 and overturned the previous administration’s protectionist aviation policies.
Now, the country is seeking to rebuild its aviation industry after turning away foreign investors for years, to get Argentina into what the country believes should be its rightful competitive position.
"It is clear that from the 12 years of closed policies, our aviation industry couldn't develop and compete," says Juan Pedro Irigoin, the administrator of Argentina’s civil aviation authority ANAC.
Irigoin was appointed to the role early this year, joining the agency after a private sector career in the healthcare and consumer food industries.
Speaking with FlightGlobal in Washington DC, Irigoin says his immediate priority is to grow Argentina’s domestic air traffic market, which lags behind that of its peers in the region.
“If you look at the ranking of the number of passengers per 100 inhabitants, Argentina is fifth after Chile, Colombia, Brazil and Peru,” he says. “That’s not what Argentina deserves.”
The country’s domestic airline industry is dominated by state-owned Aerolineas Argentinas and its regional subsidiary Austral, which for years benefited from government subsidies and favourable treatment.
“Aerolineas had 80% of the domestic market share. That has made it very inefficient,” says Irigoin. LATAM Airlines Group operates an Argentinean subsidiary, but had encountered difficulties in expanding in the market, largely due to government policies that protected Aerolineas.
“We as an aviation industry couldn’t modernise our fleet, we couldn’t see the strategy of competition,” says Irigoin.
To encourage competition and boost domestic traffic, Argentina is now actively encouraging new airlines to start up in the country. Low-cost airlines are especially welcome, as Irigoin believes that the availability of lower fares will prompt more Argentineans to travel by air.
Start-up carrier Flybondi plans to launch flights in Argentina in the third quarter of 2017, and is the most likely candidate to become the country’s first low-cost carrier, says Irigoin.
Argentina’s Macair Jet, a mostly charter operator that was acquired by Avianca’s owner Synergy, could also transform into a scheduled airline in the country.
“They want to explore mostly secondary routes within the country,” says Irigoin.
REPAIRING RELATIONS
During the rule of the Kirchners, Latin American airlines knew better than to hope for easy access to Argentina’s secondary cities.
Carriers that applied to begin service to cities other than Buenos Aires were often in for a lengthy wait, as authorities were reluctant to introduce competition on routes monopolised by Aerolineas. It was not uncommon to hear stories about foreign airlines applying for route authorities, only to still be waiting six, seven years later.
Now the tide has turned, and Irigoin says Argentina wants more connectivity from its secondary cities to major Latin American capitals. So far this year, the government has given the green light to a number of new routes to secondary cities like Cordoba, Rosario, Salta and Mendoza.
“We want to restart talks with all the different countries and update our bilaterals,” he says.
Argentina plans to hold talks with Panama, Brazil, Paraguay and Peru in the first quarter of 2017 to discuss growing flight frequencies. “There is a lot of demand, many countries are knocking on our doors,” says Irigoin.
Panama, in particular, has long yearned for more flight frequencies so its flag carrier Copa Airlines can grow. Copa wants to start Mendoza service but is not able to as it needs frequencies to free up under the existing bilateral agreement.
INSIDE-OUT REVIEW
While repairing bilateral relations is an important priority, Argentina’s ANAC is also reviewing long entrenched policies in its domestic market.
Among these is a fare band rule that restricts how much airlines can charge for domestic air tickets. After president Mauricio Macri took office late last year, Argentina removed the ceiling for the fare band, says Irigoin. However, the base of the fare band is still in place - a rule that could impede the growth of low-cost carriers.
Irigoin explains that the base fare limit was first put in place to protect ground transportation operators, but believes that the limit will be eliminated in 2017.
“At some point, we will remove it,” he says. “It should happen in 2017.”
Civil aviation authorities are also relooking how airports in the country are operated. More than 30 airports, including Buenos Aires Ezeiza, are operated by the same concessionaire, Aeropuertos Argentina 2000.
Argentina has announced a more than $1 billion investment to modernise the country’s airports, but Irigoin indicates that more could be done to improve the competitiveness of Argentina’s airports. For example, he says airport fees in the country are currently too high.
“We need to review everything,” he says, underlining the need for a wide-ranging examination of the country’s aviation industry.
“It is not possible to change everything in one shot,” acknowledges Irigoin. “But we are in a gradual process of trying to put in order something that was in total disorder.”
Source: Cirium Dashboard
