Argentina

Aerolineas Argentinas continues to struggle as government protection from competition increases

Argentina’s aviation market has taken another step backwards as the country’s Government continues to come up with new measures aimed at protecting struggling flag carrier Aerolineas Argentinas. Aerolineas, which has not yet completed the restructuring it started three years ago after the carrier was renationalised, faces another challenging year while Latin America’s other leading carriers prosper without any government subsidies or protection.

In the latest example of protectionism, Argentinean civil aviation authorities last month decided to revoke LAN Argentina’s permits to operate international flights from Buenos Aires’ downtown airport, Aeroparque Jorge Newbery. LAN is vehemently protesting the decision on the grounds the Chile-based airline group, which has had an affiliate in Argentina since 2005, is being unfairly discriminated against. LAN currently operates two important international business routes from Aeroparque, Santiago and Sao Paulo Guarulhos.

US carriers continue to dominate Latin America's international market

Although financially weaker than their competitors to the south, US carriers continue to dominate Latin America’s international market. As a result, US airlines are well positioned to exploit the anticipated growth in the region. Complacency, however, is not an option. US carriers should seriously consider making strategic investments in Latin America’s leading airline groups to ensure their place in this important emerging market.

Latin America is a natural playground for US carriers given the geographic proximity and economic ties between the two regions. US carriers have traditionally accounted for a large majority of capacity between the US and Latin America. This has always been a sore topic for Latin American airlines, who over the years have repeatedly complained about an uneven playing field and how difficult it is to compete against their larger and aggressive competitors to the north.

UPDATE: oneworld favoured with more at stake than Star in LAN-TAM alliance decision

(this article, which was initially published on 24-Sep-2011, has been updated to include initial LAN response, further discussion of TDLC measures and implications for Gol and SkyTeam)

The stage is set for the biggest global alliance selection of the decade as new airline group LATAM is being forced by Chile's anti-trust court to choose a single grouping. The decision by LATAM, the new parent company for oneworld’s LAN and Star’s TAM, will have huge ramifications as the winning alliance will be guaranteed a leading position in the fast-growing and increasingly important Latin American market. The more likely outcome is a oneworld victory, which would result in its share of capacity in the region increasing to 30% compared to approximately 15% for Star and 11% for SkyTeam.

Aerolineas Argentinas focuses on fixing highly unprofitable long-haul operation

Aerolineas Argentinas plans to pursue further capacity and fleet expansion as the renationalised carrier enters the next phase of its transformation. Aerolineas, however, has had to push back expectations for returning to profitability until at least 2H2012. With a highly unprofitable international operation and a roughly break-even domestic business, Aerolineas now stands alone in Latin America as the only loss-making major carrier in the region.