Aerolineas Argentinas announced a US judge has ruled the Republic of Argentina will not be forced to surrender its control of the airline’s assets as previously requested by bondholders (Bloomberg, 20-Aug-09).
US judge rules Republic of Argentina will not surrender its control of Aerolineas Argentinas
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Avianca airline group: bracing for changing Colombian market as Latin America starts to recover
Latin American airline group Avianca Holdings is welcoming continued improving trends in the region, which started to emerge in 2Q2016 and appear to be gaining strength in 2H2016. The company’s yield decreases slowed year-on-year in 3Q2016 to the single digits, and Avianca posted a rise in yields sequentially from 2Q2016 to 3Q2016.
Avianca’s optimism rests on robust load factors, particularly on long haul routes from its largest market – Colombia –to the US and Europe. Demand is also picking up in South America as travellers adjust to the effects of currency depreciation that, while improving, have become a mainstay in many markets in the region. Avianca’s booking trends for Nov-2016 and Dec-2016 indicate that positive momentum is continuing into 4Q2016.
The company faces changing dynamics in its largest market Colombia in late 2016 when Copa Airlines shifts its business model in the country to a low cost operation in order to compete more effectively. Avianca seems unconcerned about Copa’s change in strategy, citing its strong position in Colombia despite increased competition arising in the country’s domestic market during the last few years.
Colombia’s market should undergo further changes in 2017 when LATAM Airlines Group begins instituting a new pricing model in its domestic markets, including in Colombia.
Argentina: Aerolineas Argentinas faces a tough turnaround with government's new liberal mindset
A new liberalised mindset emerging in Argentina has drawn the attention of Latin American airline groups looking to capitalise on new opportunities in the country’s historically closed-off domestic aviation market. Avianca’s major shareholder Synergy Group is aiming to launch a new domestic airline in Argentina, and the Viva Group is also eying establishing a new airline in the country after abandoning plans to launch its third low cost carrier in Costa Rica.
At the same time, Argentina’s state-owned flag carrier Aerolineas Argentinas is attempting to transition to a more commercially minded airline after years of bleeding cash and being propped by the former Argentinian government. The airline is aiming to become solvent by 2018, but formidable challenges lie ahead for Aerolineas in reaching that goal, evidenced by the airline’s pilots recently resorting to a familiar tactic – staging a strike.
Argentina’s pledge for a more liberalised aviation market is a welcome change, but obstacles loom large for the country’s largest airline and prospective start-ups as the government still regulates domestic fares, and infrastructure costs remain high. Still, a move toward liberalisation in one of Latin America’s most closed-off markets could be one of the most important developments in the region’s aviation industry in the medium to long term.