Argentina Earns the Cranky Jackass Award for Propping Up Aerolineas Argentinas at the Expense of Real Competition

There have been so many good news stories about aviation in Latin America lately that it seems like everything is going well. The LAN and TAM merger created a powerhouse, the Avianca/TACA merger is also coming together quite nicely, and then of course, there’s little Copa rocking it in Panama. So is anything going wrong in Latin America these days? Oh yeah. We just haven’t looked far enough to the south.

Aerolineas Argentinas is a disaster of an airline that loses silly amounts of money providing a sub-standard product. (But hey, at least you can send a fax from onboard.) So why does this crappy airline still exist? It’s the same reason just about every crappy airline still exists – government funds keep propping it up.

But in the case of Argentina, it’s more than just government funding that helps Aerolineas Argentinas. It’s also a host of blatantlyCranky Jackass unfair policies that prevent a real airline like LAN from providing good service to the people that need it. LAN Argentina started a few years ago but it has had nothing but trouble since it first tried to challenge Aerolineas. A recent La Nacion article about five things the government of Argentina has done to hurt LAN (and competition in general) caught my eye.

I should say that it’s not easy to catch my eye when articles are written entirely in Spanish. But using my rusty Spanish language skills, I was able to decipher what simply didn’t seem like it could be true. So I reached out on Twitter and got a little help from @HouseofV to fill in the gaps. It turns out things were even worse than I thought. This would be funny if it didn’t mean that the people of Argentina are suffering because of it. So for that reason, I’m very happy to award the Cranky Jackass to Argentina for all kinds of suckiness. Let’s review.

1) No jet bridges for LAN
Back in 2010, a law was apparently passed that said Aerolineas Argentinas got priority for using all jet bridges in the country. Originally, nobody else could use them, but then that changed so that airlines could use them for up to two flights a day. That naturally works for some of the foreign carriers with limited flying, but it doesn’t work for LAN Argentina with a lot of domestic flights. But LAN did work around that and had a contract to use jet bridges.

If you’re flying on LAN in Argentina today, however, you’re going to be in for a surprise. All those nice covered jet bridges are off limits for LAN passengers now because the airline has been cut off. But it’s not just that they’ll have to walk up and down stairs. The airplanes are parked remotely meaning that people need to take buses back and forth between the terminal and the airplane. That slows things down and makes LAN less attractive to travelers. But why?

Guess who does all the ground handling in Argentina? It’s a group called Intercargo. And guess who owns Intercargo? That’s right, the government does. It turns out that LAN signed an agreement to have Intercargo handle its ground ops, and that agreement was to go through the end of March, 2014. But then Intercargo decided that contracts don’t really matter, and it alerted LAN that rates were going to rise by 55 percent. When LAN balked, Intercargo just stopped letting them use the gates. Now it looks like this.

2) Attempts to hurt LAN in Buenos Aires
Buenos Aires has two airports. Ezeiza is the main airport for international operations while close-in Aeroparque is used for domestic flights. At least, that was the case until 2010 when Aeroparque was also opened for flights to Brazil, Uruguay, and Chile. As you can imagine, business travelers flocked to Aeroparque from places like Sao Paulo and Santiago because of its convenience. But then guess what happened? The decision was made that LAN wouldn’t be allowed to fly internationally from Aeroparque in order to, of course, protect Aerolineas. Only after the surrounding countries threatened to block Aerolineas did they finally back down and let LAN fly, but LAN still only has a few slots while Aerolineas has many more.

3) No Rosario for LAN
Rosario lies about a 3 hour drive northwest of Buenos Aires. It’s a city with over a million people (third largest in Argentina) and it’s an important industrial center. LAN began flying from Rosario to Lima in order to connect people to important destinations internationally and the flight appeared to be doing well. Then a funny thing happened. The government told LAN its flight couldn’t continue. Instead, Aerolineas added Rosario as a free add-on to international flights in Buenos Aires so it could steal all the traffic.

4) Handcuffs on LAN’s Growth
Unsurprisingly, Miami to Buenos Aires is a good market. American flies it twice daily while LAN flies it once. Aerolineas flies it 11 times weekly. LAN wanted to add another flight in the market, but that wasn’t allowed. Instead, the government gave more flights to Aerolineas instead. Oh, and it also put the brakes on an investment for LAN to grow the fleet.

5) Summer charters only if approved
Lastly, it’s common for summer charter flights to pop up to take people from Buenos Aires to vacation destinations. The policy now, however, is that those flights can only operate if Aerolineas is going to be full.

What’s the end result of all this madness? People in Argentina suffer from poor service on a money-losing airline. New entrants are stifled and that isn’t going to change. In the meantime, Aerolineas lurches forward with attempts to get new airplanes. It hopes for success now that it’s a member of SkyTeam. But really, it’s unlikely to happen. And the people of Argentina will continue to pay the price until the government lets real competition into the country.


26 Responses to Argentina Earns the Cranky Jackass Award for Propping Up Aerolineas Argentinas at the Expense of Real Competition

  1. Bravenav says:

    OK, Aerolineas vs. Alitalia. Who’s worse?

    • Eric says:

      The histories of Aerolineas and Alitalia are almost identical narratives with different actors. The key principal of Kirchnerism is the rejection of neo-liberalism and deep distrust of free trade. At the end of the day…there is nothing to see here. AR is just a typical example of how things are in all facets of the economy. (note: I am of Argentine descent and not big on Justicialismo, so my opinion is biased )

  2. Jorg says:

    In general I can’t agree more with this story. I would like to add a small detail, though: Aeroparque (AEP) before 2010 could be used internationally, though only to Montevideo (MVD), Uruguay. This was the only exception to the rule and I’ve used it on the shortest full-service flight I ever had (imagine drinks and food on a 30 minute flight!).

  3. Mike Combs says:

    Great post. Sad situation in Argentina. Hopefully 4M will stick it out in the market with the knowledge that Cristina Fernández de Kirchner can’t remain president forever. Hopefully the next government will end this madness.

    One small correction. AA operates 2 night flights and 1 day time flight on EZE-MIA-EZE.

    • CF says:

      Mike Combs – I see only the two night flights on American. Maybe there was a day flight that’s now gone?

  4. It’s a good thing the US government has never interjected to keep a failing airline alive, and that no state governments have ever restricted the types of flights that can be flown from certain downtown airports to protect certain mega-carriers.

    Isn’t that right Texans?

    • MeanMeosh says:

      For the record:

      1) The Wright Amendment you refer to was a federal statute. The state government had nothing to do with it, and has no control over airport operations anyway.
      2) Most North Texans, and anyone else who needed to use DAL/DFW as their home airport, hated the Wright Amendment (I would say most of the rest of the state couldn’t care less about it, though many a Houstonian watched the ensuing sideshow with glee). It was largely regarded locally as a payoff from Jim Wright to AA and other parochial interests from his home district in Ft. Worth. About the only people who seemed to support it were the mayor/city council in Ft. Worth, and a few neighborhood associations around DAL. These groups fought tooth and nail to keep the Wright Amendment around, though thankfully, they lost in the end, albeit with the crappy 20-gate limit at DAL.

      • But by the end the principal beneficiary of the Wright amendment, Southwest, was even tacitly wishing for its demise as DAL had lower loads than the rest of the system.

        While I’m on DAL and thinking back a week: CF wasn’t Legend Airlines before JetBlue on installing LiveTV? AFAIK Legend was an all premium airline flying 56 seat DC-9s out of DAL to major markets.. AA even reconfigured some F100’s to compete.

        • MeanMeosh says:

          I don’t remember whether LiveTV was part of the deal or not, but you are right about those reconfigured all-premium 56-seat DC-9s. Granted this was over 10 years ago, but there were some crazy $189 R/T fares to LAS for a little while. Legend even had its own separate terminal at DAL to round out the premium experience. Unfortunately they went out of business before I had a chance to try them out.

        • CF says:

          Wow, you’re right Nick. Sure enough, Legend had LiveTV and I had no idea.

          Now, if we’re talking about the Wright Amendment, that’s really a completely different story than what’s happening in Argentina. Anyone was free to fly out of DFW anytime they want as many times as they want. But for those who wanted to fly from Love, they had geographic restrictions. That didn’t vary by airline – it was the same for everyone who wanted to do it.

          That’s how it used to be at Aeroparque where everyone had the same restrictions on where they could fly. It was only domestic except for apparently Montevideo (thanks Jorg). But when the government started creating special rules for Aerolineas, that’s when things changed.

          Regarding saving failing airlines, no doubt about it. While I don’t support bankruptcy laws the way they work in this country, at least at this point they’ve created independently viable carriers. In Argentina…. not so much.

  5. Sanjeev M says:

    It’s not just LAN that was a victim. Pluna (the former national carrier of Uruguay) was severely limited because its largest market (Argentina) is heavily restricted.

    @Southeasterner LUV that comment!

  6. Konstantin says:

    The other not-so-shiny exceptions in the Latin American airline industry are probably Venezuela and Bolivia (anyone can see a link…?).

  7. JM says:

    Agree with other posters that AR reflects the social policies of the Kirchner administration. AR isn’t an airline, it is a government social program with wings.

    I like Argentina a lot, but attempts to explain their current approaches to economics are beyond reason. Check their recent nationalizations of private companies like YPF Repsol, for instance. And of course, Aerolineas itself was (re)nationalized a few years back after the government kicked majority owner Grupo Marsans out (given their record of running Aerolineas and Austral, Marsans’ departure was not altogether a bad thing…).

    Another curiosity to me revolves around the currency restrictions which limit Argentines’ access to U.S. dollars. The Argentine government takes a very interesting approach to some things, with AR no exception: http://www.csmonitor.com/World/Americas/2012/0612/Argentina-clamps-down-on-public-access-to-US-dollars

    As for the airline, late last year there was this flap about the CEO drawing three salaries from the government all at once: http://www.lanacion.com.ar/1523773-ocana-acuso-a-recalde-de-cobrar-tres-sueldos-en-aerolineas-argentinas and http://m24digital.com/en/2012/11/05/recalde-and-his-three-salaries-in-aerolineas-argentinas-video/

    Despite all of this, AR’s onboard product has improved and there are new planes at Aerolineas and Austral. Hopeful signs? I hope so.

    Not that I am defending this “different” way of doing things, mind you. In the end, the music (and money) will stop. At least I think so, anyway…

    JM

  8. Phil Perry says:

    Excellent article, especially its accuracy.

    In addition to competing airlines being damaged, the cities that have been denied additional air service have been harmed, such as Rosario, Mendoza and Iguazu Falls. Good air access always enhances the economy of a city and surrounding region.

    For several more examples of anti-competitive practices by the Argentine government in favor of Aerolineas, see this posting on my blog covering commercial aviation news in Argentina and neighboring Uruguay. The worst proposal was to make Aeroparque exclusively for Aerolineas/Austral banning all other airlines from serving the airport altogether (didn’t get that one through).

    http://argentina-airline-news.blogspot.com/search/label/Aerolineas%20Argentinas

  9. Axelsarkis says:

    You should simply retitle the headline as “Kirchner earns a Cranky Jackass” for several reasons, this being one of the many…

  10. Andrew Dwyer says:

    Oh Cranky, you reminded me of something that very much reflects the absurd picture you’ve painted above. I worked as an agent here in Australia for 10 years, and when Qantas (re-)introduced nonstop services from Sydney to Buenos Aires, they had planned to codeshare with LANArgentina. Both airlines put their codes on the flights, and then it got closer and closer to the start date, and the Argentine authorities never permitted 4M to put their code on the flights.
    This went on for the 5 or so years that QF flew into EZE (they now fly into SCL instead as in the end LA manages to offer a lot more connections across the continent from there… now I see why!).
    And so for 5 years, agents could still book 4M flight numbers, and 48 hours prior to EVERY FLIGHT DEPARTING, the seats would HX, and become QF flight numbers. Yes, QF flight numbers on LA tickets. LA would automatically reticket the flights for each pax. A very complicated process, especially if pax made last minute changes in the few hours prior (or after departure of the first flight).

  11. Bill says:

    Even worse – the government (basically expropriated Argentine Airlines from Marsans in Spain) takes the whole Arg Air as a matter of pride. LAN who has a great product and blew their doors off is continuously subject to labor “activity”. Strikes, slowdowns and work to rules; coupled with government hassles LAN is horribly crippled.
    But according to the far left govt it is capitalism’s fault.

    Sad days in Argentina
    Que Dios les ayuda!

  12. AR has always been a issue for one thing or another and that woudl filter down to their workers. If a agent didn’t like that your AR flight was issued on another airlines ticket stock, they wouldn’t take the ticket and you would have to buy a new ticket from them if you wanted to fly.

    Hard to believe a government would still pump money into a carrier instead of letting it go private and saving on costs. Argentina is a large country so you would think a number of start ups could work.

  13. A well deserved award.

  14. Giuliana says:

    I’m not sure what you mean exactly by “poor service” but don’t forget there are people that work for AR who care about passengers just about as much as LAN staff does. I’m one of those people so in that sense, this article can be offensive. I don’t know whether you live here and are a frequent passenger or what’s the deal but LAN service isn’t as far from ours. Austral planes for instance are newer than any of LAN Argentina aircrafts and people seem to be pretty pleased with them and with us when they travel.
    Other than that, you’re completely right. What they are doing is very unfair and our government sucks :)

  15. Adrian says:

    Gee, it shows that I’m out of touch. As someone based in AKL (Auckland, New Zealand), I didn’t realise that AR had pulled out of flying EZE-AKL-SYD completely. I knew they had started non-stop EZE-SYD flights, but I didn’t realise that all flights were now like that.

    That now pretty much gives LA a free rein for anyone from New Zealand wanting to travel to South America. LA fly SCL-AKL-SYD-AKL-SCL 6 times weekly. LA were always the far superior airline anyway. But LA has always been more expensive than AR. The airfare would have to be truly spectacular for anyone in AKL to go AKL-SYD-EZE – that’s completely backtracking.

    I’m only ever been on the AR A340 once AKL-SYD. It is a VERY old aircraft, with no personal TVs and an awful centre screen. The food was very average, and service was gruff. AR were also almost constantly late on the EZE-AKL-SYD return route – often due to breakdown of aircraft. The only good thing about AR was the legroom.

  16. Tim says:

    I echo other comments on this post. While AR is in many ways a victim of the government that supports it (and owns it!), I will say that I have flown with Aerolineas on several occasions. Their service beats anything offered by the North American carriers…without exception! I would take some government intervention if it meant the service would improve. US carriers have devolved into third world carriers from a service perspective.

  17. John says:

    And it continues. LAN Argentina now evicted from it’s hangar at AEP:

    http://www.bbc.co.uk/news/world-latin-america-23791806

  18. John Kowal says:

    Such a sad state of affairs for the common man in Argentina and such a large pot of economic gold for Christina and her private club of crooks.

  19. YasRodu says:

    LACK OF RESPECT FOR THE HANDICAPPED ELDERLY.

    I drove a family member to the airport. He is legally blind and suffers of heart failure, a elderly man. Because his suitcases were over 1 kilo they made this blind man with heart failure open his suitcase in the middle of a busy international airport. The poor man was so humiliated by the response of management that were unable to provide any resolution or assistance that he became paralyzed with fear and would not move. He wouldn’t leave the airport afterwards and management was unwilling to offer support. They did not care and made no exceptions for a handicapped person. He is a man of limited resources and didn’t have enough to pay for two suitcases and was told that he would have to pay – I agreed but begged that they please let one pound go by and make him open his suitcase since it would humiliate him and because of his blindness it would be difficult for him. They did not care and made no handicapped exceptions. Once we decided that I would pay for him they insisted that he was still one pound over weight and will still need to open cases in public. They humiliated us both and mostly embarrassed a very proud and struggling elderly man. I hope that this company does the right thing for this person and I remind all people to consider before booking a flight on this airline if they would be OK using a company that treats an elderly family member this way before buying a cheap ticket in a cramped airplane.

    The company policy and services is appalling. No one should be treated this way. I give it no star and promise that unless they rectify the matter to never use this airline again, and to assure that no family does either.

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