In case you were wondering, no, México and Italy do not have a monopoly on bad airline strategies. Argentina has long been one of the standard-bearers of bad airline policy, manifested in the woeful performance of its flag carrier Aerolíneas Argentinas. Now the country is ready to cut ties after re-nationalizing the carrier 15 years ago. If this happens as suggested, this will be the end of Aerolíneas Argentinas, but let’s be honest… bad airlines never truly die.
Argentina has long protected its flag carrier with a vengeance. The airline has only occasionally been asked to turn a profit, depending upon the government’s whims. But don’t worry, the pressure was never that great, certainly not since it was re-nationalized 15 years ago. The only thing that makes Aerolíneas Argentinas more viable than, say, Alitalia/ITA is that the Argentine government was much better at propping up the flag carrier and pushing out competition for most of the airline’s history.
Strangely enough, Aerolíneas has been pretty consistent with its seat capacity remaining between 50 and 60 percent for all departures from Argentina. Just take a look.
Argentina Departing Seat Capacity by Airline
This chart isn’t completely right, because Flybondi started flying in 2018, but I don’t show schedules in the data until 2022. So chances are that baby blue Aerolíneas should be even more consistent. The airline just trades competitors depending upon how the winds shift politically.
Just ask LATAM, the airline that had designs on creating a functional, commercially viable operation in Argentina. It never truly succeeded thanks to protectionism and finally shut down LATAM Argentina in 2020 as some of the most strict COVID protections in the region proved to be the final straw. The laundry list of problems is lengthy and sordid. You can read about some, including the Aeroparque hangar drama here.
Low-cost operators have replaced LATAM’s presence in recent years. The door opened when Mauricio Macri became president in 2015. He allowed competition in the country, but it hasn’t been easy for those airlines. Back when Norwegian was full of nothing but bad ideas, it made a run in the domestic market, but that was sold off to Jetsmart. That airline and Flybondi have been locked in a battle for relevance. Flybondi is reportedly profitable, but it still only has 15 airplanes. After 5 years, that doesn’t seem like all that much for a low-cost operator. Even with low costs, competing with heavily-subidized Aerolíneas is an uphill climb.
But now, the government of Argentina has seen a seismic shift. The often-reigning left-wing Peronistas have lost control, only to be replaced by Trump-like, right-wing populist Javier Milei. Milei wants to slash and burn within the government ranks, so naturally the subsidies propping up Aerolíneas are an easy target.
According to Argentinian newspaper Clarín, Milei has a plan. It’s a bad one in the sense that it will never actually work from an Aerolíneas perspective. But it would be good for travelers in the longer run.
Milei wants to stop subsidizing the airline and create an “open skies” policy that would allow competition to flood the market. How would Aerolíneas survive in this new world? Well, he would turn the airline over to be employee-owned and run. Oh yeah, that’ll work.
Milei is trying to navigate a complex situation here. As with most poorly-run, state-dependent carriers, there are too many employees and they are overpaid for the work they do. It’s like a state-run jobs program, and killing that is a political hot potato. So give the airline to those people to run, right? Riiiiight. Generally, letting the inmates run the asylum is not the best plan. But Milei says they can do it.
El personal de Aerolíneas es un personal muy calificado, el problema radica en la contaminación política
Milei is saying that the politicians have ruined Aerolíneas and the employees will be able to save it. That is most certainly not the case, but it does set up Milei to blame those employees for the failure of the airline when they can’t right the ship instead of himself. Whether anyone will buy that narrative or not remains to be seen, but… ok, nevermind. Nobody will care.
In the long run, this will be good for competition. It will allow better airlines to provide service to a lot more people in the country. But with nearly 12,000 jobs in the balance in a country that’s been hit hard by high inflation and a weak economy, Milei will have to make a decision when the time comes to bail out the airline again or let it die, the two inevitable possible outcomes. His best hope is to wait until he’s voted out of office and make it someone else’s problem.
32 comments on “Aerolíneas Argentinas is About to be Fed to the Wolves and That’s Ok”
I call dibs for one of the onboard fax machines when they join the list of Airlines We Lost 2024!
This will be interesting.
I am going on a cruise from Buenos Aires around to Santiago in February. Decided to add on a trip to go see Iguazu Falls, so we are flying there from BA and back.
Worked out best to do two one ways so we are on FlyBondi on the outbound and AR on the way back.
Hopefully Milei won’t have torn it apart in two months.
If possible, try to see Iguazu Falls after dark as well as during the day. It’s an entirely different experience to be standing on the end of the boardwalk overlooking the falls and using your senses to mostly FEEL and HEAR the power of the falls, while also (to a lesser extent) seeing the shadowy falls in the moonlight.
Not sure if that is still an option or still offered; I did it by chance in July 2007 when I happened to visit the falls during a full moon and learned of the after-dark tour from the staff.
To see the falls at night now, you have to stay inside the park, at a massively overpriced luxury hotel. Decided not to.
Here is the deal: there is no free lunch. Argentina is country #7 is size but #30 in population. Furthermore, there are just 10 metro areas with more than 500,000 inhabitants. That means that most of Argentina is very sparsely populated and places are very far away one from the other. The money-making private airlines only serve these few larger metro areas and a few high-demand touristic destinations. Aerolíneas does a social service by connecting all Argentina. Most of its domestic destination are not served by another airline and most likely could not be done profitable for the other airlines even without the unfair competition of Aerolíneas. So when Milei gets rid of Aerolíneas, he will have to make a decision: keep subsidizing those economically unviable destinations (perhaps with a subsidy bid model), which will cost taxpayers money, partially (and not in a minor part) offsetting the savings of getting rid of Aerolíneas, or leave most of Argentina without airline service which will strongly damage the regional economies and the country’s economy overall. Again, there is no free lunch.
Just for grins I pulled up the destinations out of AEP by airline, and flights on a given Friday (this was in July or August of this year).
Here is a list of the domestic destinations served only by AR.
Bahia Blanca 3 flights
El Calafate 4
Formosa 2
La Rioja 2
Mar del Plata 3
Resistencia 3
Rio Cuarto 1
Rio Gallegos 4
Rosario 1
San Juan 3
San Luis 2
San Rafael 1
Santa Fe 1
Santa Rosa 1
Trelew 1
So we aren’t talking a massive number of flights to cities with no private competition. 32 flights on an average day to 15 destinations.
AR does still have the lion’s share of domestic flights to all destinations though. Won’t be easy to replicate privately.
Aerolìneas’ service to Mendoza from AEP is OK – and frequent. They offer flights from EZE. but EZE is a *long* way from the city. It’s not a bad airline for passengers, but it’s got the “feel” of total indifference. At least FlyBondi is answerable to its owners.
John, you cannot analyze in that way the situation in Argentina.
There are 39 domestic destinations TOTAL. All of them served by Aerolníeas Argentinas and 20 of them (more than 50%!!!) are served ONLY by Aerolíneas Argentinas.
The 39th metro area by population in Argentina has some 80,000. Many of these cities don’t see daily flights but 2~3 times per week.
So your “just” 15 destinations is A LOT.
Aerolíneas serves 38 domestic destinations from Buenos Aires (Aeroparque Jorge Newbery and Ezeiza) for a total of 39 when you count Buenos Aires itself.
Aerolíneas also connects 24 city pairs without passing through Buenos Aires (also served from Aeroparque, so no new destinations).
Compare with the other 2 airlines:
Flybondi serves 18 destinations from Buenos Aires (Aeroparque and Ezeiza) for a total of 19 metro areas counting Buenos Aires itself. All of them also served by Aerolíneas Argentinas. It also serves 4 repeat “non-Buenos Aires” destinations from Cordoba, pairs also served by Aerolíneas.
Jet Smart has 11 destinations from Buenos Aires (Aeroparque and Ezeiza) for a total of 12 metro areas counting Buenos Aires, and has 5 “non-Buenos Aires” city pair flights without adding new destinations. All flights are also served by Aerolíneas.
Again from the 39 destinations served from Buenos Aires by any airline, 20 (more than 50%!!!) are served ONLY by Aerolíneas Argentinas. And most of the “non-Buenos Aires” city pairs are also only served by Aerolíneas Argentinas. Many of these destinations are not economically viable, and the Argentinian state is doing a social service by subsidizing these flights with taxpayers’ money. This is not the only source of Aerolíneas Argentinas déficit, but it is a good chunk (the rest is sheer inefficiency and unions’ mafia). If these destinations are not served, the impact in the regional economies will be huge, and also in the country’s economy. Spare parts and technicians need to reach these areas to repair oil rigs, set up manufacturing plants, assess soil condition for crops, etc. Perishable products like fruits need to be taken quickly to their consumption destinations in Argentina and worldwide. Stopping all that may cost more to the economy than the Aerolíneas Argentinas losses. Enabling real competition and have the airlines (including Aerolíneas) bid for the lowest subsidy for non-profitable destinations, can be the sweet spot where we save a lot (but not all) of Aerolíneas Argentinas loss (part of those savings would go to the subsidies to the best bidder) while not impacting the economy in other ways.
My mother is from Argentina and her cousin and at least two other relatives work for the airline. They are lifers and get great perks ?
One other comment, about why the aviation industry in Argentina struggles and will continue to do so.
Similarly to DC, BA has their international airport way out, and a local airport with restrictions close in. All flights from outside South America go to Ezeiza, but to connect anywhere within the country you have to go to Aeroparque.
We had to actually rent a car to drive between the two so we can connect to Iguazu. There are no reasonable international connections to there or some of the other Argentinian cities.
Makes it very hard for a carrier to build a decent hub.
Hi John G!
Really?? There’s bus company named “Manuel Tienda Leon” that offers bus service between AEP and EZE – with almost hourly departures.
Best regards! Rafael
Thanks Rafael. We considered the bus, but we got a decent deal on a rent car, so we decided to drive between the two, and do a little sightseeing on the way.
I like driving in crazy places. I’ve driven everywhere from Mexico to the Dominican to Costa Rica to downtown Rome. Rome was the craziest place I’ve ever driven, but a close second was driving in the DR, between Punta Cana and Santo Domingo. Crazy with trucks and minibikes and no shoulders. I’ve also driven on the road around the Arc d’ Triumph. Driving around the Obelisko on Avenida 9 de Julio is very much on my bucket list!
Avenida 9 de Julio is the widest boulevard in the world. The Dólar Blue joints are close to the Obelisco, on Calle Florida. You can climb to the top of the Obelisco, but that’s *not* on my bucket list.
Cranky mentioned it briefly, but to add specifics, it’s worth noting that inflation in Argentina is running 12+% PER MONTH, and 130-150% per year at present.
I can only imagine how hard it would be to run a business (especially an airline) with inflation like that, even with good management and a reasonable cost base.
Sad because Argentina has significant natural resources and a lot of potential. 100ish years ago it was one of the top 10 or 12 countries in the world economically by some metrics, but that’s long since passed.
Hi CF!! Thanks to bring this topic to the website.
I wouldn’t be surprised to know that AR has 50/60% of departures from Argentina, because its offer a wide range of destinations to Europe, North America and Latin America, mostly focus in Brazil, the main business partner of Argentina in the region.
When comparing Domestic Market, AR is logically at 62% of Market Share (having almost 80 airplanes and serving Domestic destinations that other carriers don’t care to serve, because their business model doesn’t works in those destinations. FB and JS splits the remaining 36%, all of them operating at higher passenger levels than 2019 for instance. Still, FB has more planes than LATAM Argentina in its best years. The cake has grown as ever and the Low Cost carriers are operating at AEP – a much better airport compared to EPA – El Palomar, which used to be the base for FB and JS. So, the market conditions today are much better than in the Macri era.
https://www.sirchandler.com.ar/2023/10/pasajeros-de-cabotaje-en-septiembre-nuevamente-por-encima-de-la-pre-pandemia/
Even still, AR has improved the Load Factor considerably in the last couple of years, making better use of the fleet and other resources. And bearing in mind that the population is heavily localized in a few cities; that leaves many city pairs with thin demand; and that’s where the E190 plays the crucial role of keeping the operation viable.
Summing up, AR has grown and improved quite a lot in the last years. Also, AR has signed a MoU with Abra Group (Avianca and Gol) to have more synergies in the region against LATAM; and will offer a better passenger experience by the installation of Wifi in the fleet (may I guess some kind of requirement by the Abra group, to standarize the experience to be offered). Surely, some more tweaks could be needed, but during 2023, AR didn’t use the funds assigned by the government. Just as FB, both carriers went to the Capital Market to apply for funds.
https://www.sirchandler.com.ar/2023/10/aerolineas-argentinas-y-flybondi-anuncian-el-mismo-dia-movimientos-en-el-mercado-de-capitales/
In my humble opinion, the Argentinian state should focus in other areas, where a lot of money is being thrown out. Also, AR connects many destinations that nobody serves, so all those markets would be left aside; and the economies of those places would struggle to survive. The deficit issue of the Country is not ARSA, it just that people wants to talk nonsense, and don’t take the time to actually check what is true and the actual consequences.
Thank you so much for your attention!
Rafael
Rafa, I think that AR should be put in equal conditions with all airlines. Routes are assigned discretionally typically favoring AR. Aeroparque parking slots are unfairly prioritized for AR. Compare the % of domestic Buenos Aires flights that depart from AEP or EZE in each airline. Prices of tickets have minimum applied so other airlines cannot offer prices way below AR. And of course AR receives millions of dollars in subsidies (historically 700 millions per year which is 2 millions per day, although it has gone down lately).
What you say about AR serving many destinations that no one else serve and how getting rid of those wood affect regional economies (and Argentina’s economy as a whole) is totally true.
So, again, I suggest that AR and the other airlines are put in equal conditions of competence, and to serve these destinations that are nor profitable make them bid. The airline that asks for the lowest subsidy for each destination wins that destination for say 5 years.
The fact is that AR is quite inefficient and has low productivity. With salaries than are higher than other airlines because the tax payer pays anyway. With pilots that stay in lavish hotels with their wives when they go to US for sim training, all paid by AR (that is by you and me) (vs going to a 3* hotel in Sao Paulo, without the wife). With a payroll in al functions that is disproportionate compared to the size of the operation. With unions that act more like criminal gangs that organizations to defend the interest of the employees (which should include have a good efficient and productive airline that is sustainable).
At the very least, AR (and their unions) should be “threatened” to be handed over to the employees if they don’t get their act together and make the airline competitive, which includes flying to those non-economical destinations IF they win the subsidy bids.
Guys like Milei are the hot trend at the moment & we’ll see what he can do. However being Trump like isn’t a positive in the long run.
Too quote “While you were sleeping,” “Argentina has great beef… beef & nazi’s.”
Lots of good food and wine in Argentina.
The Italian food in Argentina is absolutely top-notch as well, as more Italians than Spaniards emigrated to the country. I’m not usually a huge fan of Italian food, but it’s tough to beat pasta that was made fresh from flour only a few hours before it gets dropped into the pot to cook, and there are plenty of restaurants and neighborhood shops that offer that.
The pastries & sweets there (such as alfajores, or medialunas [croissants] with cafe con leche spread on top) are also worth a mention, and the city of Bariloche (think Lake Tahoe, but with a Swiss alpine village feel) is known for its artisanal chocolate shops.
Meanwhile United just launched 3x weekly IAH-EZE in addition to its already daily service. Wonder how these changes will affect that. I’m sure it’s apples and oranges since UA isn’t likely after that Argentine point of sale as much as the US side.
The fact that international flights come into EZE and domestic flights are almost all at Newberry is an absurdity. And everyone seems to talk like EZE is 100 miles away from BA. Fact is, it’s like 16 miles from the central area of downtown BA and is just as close to where many people live as Newberry is. Granted, Newberry is much closer to the affluent north shore (I’ll grant you that) but it’s also a very small and hemmed-in single runway (technically that means 2) airport. There are ways to deal with that.
Also, I’m amused to see the snark on anyone identified as “Trump like”. Milei is similar to Trump in that he is an outsider and on a quest to reform anything. In other ways they are different. But if you know anything about Argentina, you know reforming pretty much every insitiution is long overdue. The Peronists have ruined that county’s economy. He’s a reaction to that. Will Milei be successful? Time will tell. It is tough to teach old dogs new tricks. But if revamping the economy of a nation that has long wasted so much promise costs us AR and their pretty blue livery – so be it.
Great perspective!
BA is not really different from places like Tokyo or DC. People want to fly to the close-in airport. At 1 PM local time today, it is showing 57 minutes drive between EZE and the Obelisk, in the center of BA. Plus there is direct train service to AEP but not EZE.
AEP is just far more convenient, especially to locals with money, the people who do most of the flying. The only way you would get people to fly out of EZE is to force it by passing legislation, like what was done with DCA and LGA, or when they tried to close Love Field in Dallas.
We flew Aerolineas Argentinas this October, on a domestic flight from AEP.
Stepping into AEP in the morning was like stepping into an American airport in the mid-1990s.
There were two enormous check-in lines–one for destinations south, one for destinations north. Over an hour wait in both to check-in. An ARMY of check-in agents working both lines. Not a (useable) kiosk, a self-tag bag machine, or any automation in sight. Then, our bag was overweight. But you couldn’t pay the overweight fee at the check-in counter. Instead, you were given a boarding pass ripped-in-half and had to go stand in another line at the payment center counter, where a separate employee handled the payment and issued you a new boarding pass.
So, not enough knowledge to comment on the political situation, but let’s just say there are definitely some opportunities for that airline to be run more efficiently.
AR is what happens when the pain of the people of the country as a whole becomes too large to continue to protect the fairly small number of people that benefit from the economic failures of state-subsidized companies. It is very sad to see what Argentina has become and I absolutely pray that all of these measures are not too little too late but there will be pain in even attempting to turn things back around.
The fact that private airlines have worked and AR has tried to be competitive proves that it isn’t work propping up AR any longer. There is all kinds of capital that will flow into Argentina if there is a chance of modernizing the economy and making money on an equal playing field for all competitors.
From an international aviation standpoint, every airline on the planet that has any interest in Argentina will add flights to try to gain permanently from AR’s demise. The real question will be if/when foreign airlines invest in the domestic Argentinian market.
Tim, Argentina has its own intrinsic complexities that go beyond the political, economical and sociological. 7th country by land, but 33th by population, and 50 of the population concentrated around the 15 metro areas with more than 200,000 inhabitants. Most of the provinces don’t have a single city / metro area with 200,000 inhabitants. BUT THEY NEED AIR SERVICE. And the Argentinian economy at great needs this air service because oil and gas, mining, agro (including regionals like fruits and wine) and many factories tend to be located far away from these 15 metro areas.
There are 39 metro areas served by some or other airline. AR serves all of them. 20 of them (more than 50%) are served ONLY by AR, as well as most existing citi-pair flights that not include Buenos Aires are served only by AR. Many of these routes are not economically viable without subsidy, and this is one of the great sources of loss for AR (the other being sheer inefficiency). No local airlines and no “international airline on the planet that has any interest in Argentina” will fly these destinations. Not without government subsidy. And the subsidy partially defeats the purpose of getting rid of AR. It is relatively easy to fly to the 15 or so destinations that the other 2 airlines (Flybondi and Jet Smart) fly and make a profit. Even AR could do that.
? Don’t cry for me, Aerolíneas… ?
Great article, positive, encouraging, void of cynicism – keep it coming. Luckily the USA have a fantastic air transport system, in particular the airports, the overall infrastructures and the friendly., welcoming wardens at passport control when you land. And never queues!
I agree completely with Scampo’s endorsement of CBP and their technology enhancements to enter the USA. You can be through Passport Control in literally one minute with Global Entry.
What Milei said was let the airline be run by its employees and union, without tax payer money to subsidize them. Aerolineas has very capable people, that run the company, the problem is a lot of the workers are just political militants that do nothing.
So Milei is saying the workers themselves will get rid of the non productive ones.
No matter how capable the people. Aerolíenas cannot make a profit when more than 50% (20 out of 39 total) of the domestic destinations served by any airline are served ONLY by AR because they are not economically viable. And just dropping all those destinations would be catastrophic for the regional economies and the economy of the country as a whole.
I heard that UA is applying to also serve the other airport in BA, AEP.
If they are, with the new government they actually have a chance.