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January 16, 2017
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Gov’t confident that Aerolíneas can compete with low-cost airlines

A demonstrator displays his Aerolineas Argentinas tattoo during a protest against proposals by low-cost airlines to operate domestic and international flights in Argentina.

Transport Minister Dietrich points to increase in number of passengers carried in 2016 despite increased competition as unions express worries about future of flag carrier

On a mission to double the size of the domestic flight market, Transport Minister Guillermo Dietrich has insisted that the possible entry of low-cost competitors will not adversely affect flag carrier Aerolíneas Argentinas and its affiliate Austral.

In addition, the Mauricio Macri administration expects investment in the sector to reach US$ 1.7 billion and create 5,000 jobs, particularly in the provinces with plans by some airlines to set up their operations in places such as Córdoba or Tucumán.

However, the entry of new airlines has been met with resistance from many of the unions in the sector, setting the stage for potential conflict once the ANAC civil aviation regulator issues its recommendations on the proposals made by five airlines during a public hearing in late December. Multiple unions have already announced that they plan to go on strike in March when a second public hearing takes place.

Growth and competition

In response to questions from the Herald about whether state-owned Aerolíneas could compete with new entrants into the market, including low-cost carriers, Dietrich responded emphatically that the government sees no challenges to that development.

“Of course (they can compete). What we are looking for is that Argentines who didn’t fly before begin to do so and that means that Aerolíneas also grows. The flag carrier has already shown this year that it can be competitive” Dietrich said.

As such, the minister pointed to the increased competition that Aerolíneas has already faced this year, with existing competitors gaining access to new routes at the same time as the airline carried more passengers.

“We did things (in 2016) that had not been done for a long time: new bilateral agreements, we issued new routes that had been bid on years ago, we didn’t persecute companies that are in the market with rules such as not being able to use the jet bridges in the airports. These new rules have allowed for more investment and has allowed for example Andes Líneas Aéreas to incorporate a new destination every month” noted the minister.

That growth means not only are more Argentines travelling on planes, but according to the Transport Ministry there has been a seven percent increase in the number of passengers. Growth in the market was five percent overall in 2016.

“Aerolíneas today has 300 more flights a month than it did in 2015,” and more plans, argued the minister, insisting that “we made changes that were supposed to be a hindrance and the market grew, Aerolíneas grew and on top of that it managed to reduce its subsidies by half.”

Trouble ahead Not all is rosy at Aerolíneas, of course.

After less than a year as head of one of the biggest state-run companies, Isela Costantini suddenly resigned just before Christmas as head of Aerolíneas Argentinas airline, to be replaced by Mario Dell’ Acqua, who was serving as head of state-owned Intercargo and worked for many years at the Techint steel giant. In a statement, Costantini said that she decided to quit “due to personal issues” and sent a letter to the employees saying that they have worked “professionally and transparently” during her presidency. While some have spoken of disagreements with Dietrich, allegedly because she did not want to make cuts in the company’s budget nor lead a plan of layoffs for the company, Cabinet Chief Marcos Peña said that Costantini’s time “was up” and that her role was worn out after 11 months in charge. Meanwhile, Peña has made assurances that there are no plans of a privatisation of Aerolíneas, a move feared especially by unions.

Union leaders have regretted her departure and praised her role as head of the state-owned company. By the same token they have also made it clear that they are very wary of the companies seeking to enter the market.

Andes Líneas Aéreas, American Jet, Alas del Sur, Avian Líneas Aéreas (an affiliate of Avianca and previously known as Macair, a part of the Macri Group) and FB Líneas Aéreas, better known as FlyBondi, all presented proposals for routes at a non-binding hearing last week. Some of the routes requested coincide with those currently operated by Aerolíneas.

As such unions such as the APTA association of technical aeronautical staff used the hearing to express concerns about new arrivals on the grounds that existing infrastructure could not cope with an expansion, the financial support that the companies enjoy and most importantly that Aerolíneas be “defended.”

“I’d like to inform the government authority, the political authority, and this is not a warning nor a threat, rather a decision that we have all taken: do not mess with Aerolíneas and Austral, because you will find us. Not only in the street, you are going to find us challenging all of you.

“We aren’t going to allow this government nor any government to try to close either companies, flexibilize our work or downsize us, to give that market to others. If they want to come, they can come but we are going to resist” said APTA Secretary-General Ricardo Cirielli.

In that vein, there have been promises from the unions that they will file a criminal complaint against Aerolíneas officials for failing to reject the entry of low-cost competitors.

APTA is one of many unions in a sector that has several unions that single-handedly shut down operations at either an airport or an airline. As such, APTA is not the only one that has expressed concerns. The APLA pilots’ association has also warned that in its view jobs have been threatened by this process and the APA aeronautical staff union mobilized to the public hearing to “not allow low-cost airlines in Argentina.” Many equate low-cost with laxer abour legislation or unfair competition.

At the hearing, Dietrich said that any new companies would have “to abide by the rules in our country, and employ pilots and staff from our country.” The ministry has also indicated that new entrants will go hand in hand with new infrastructure and technology spending across the country further to the completed renovation of the Mendoza international airport and that many of the provincial airports are running under-capacity.

But not all is trouble.

Cirielli, the same union leader who laid into the new entrants, had kind words at the hearing for two airlines that are already flying. “I first want to thank two companies. American Jet and Andes, that have been flying for years in Argentina, complying with all of the roles and they have dealt with various economic changes. That is why I am happy that they are here asking for more routes, because they have demonstrated that their experience has been based on complying with all of the current Argentine norms, and that is an important merit in this country.”

Herald staff

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