Aerolíneas Argentinas S.A.
Originally founded in 1950, Aerolineas Argentinas is the national flag-carrier of Argentina and is the parent company of regional airline, Austral Lineas Aereas. Aerolineas Argentinas and Austral operate an extensive domestic and regional network as well as international services. The group also operate Aerolíneas Argentinas Cargo and Jet Paq (cargo services), Aerohandling (aircraft support services) and Optar (travel agency).
Headquartered in Buenos Aires, Parent company Aerolineas Argentinas is majority owned by the Argentine government while all subsidiaries are wholly owned by Aerolineas Argentinas. Subsidiary airlines include:
- Austral Lineas Aereas (since 2008)
912 total articles
21 total articles
LATAM Airlines Group faces bigger challenges outside Brazil, as competitors in Peru and Chile attack
During the sharp economic downturn that has engulfed Brazil for more than a year the LATAM Airlines Group has benefitted from less challenging conditions in the domestic markets of its Spanish speaking countries – Argentina, Chile, Colombia, Ecuador and Peru. But during 2Q2016 weakening economies and currency pressure in some of those markets, along with growth by LATAM’s competitors, created challenges for the company in those countries, particularly the Peruvian and Chilean domestic markets.
Some of the competitive pressure in Peru’s domestic market should ease in 2H2016, which should benefit LATAM for the remainder of the year. The company is making a significant international push from its hub in Lima in 2016 and early 2017 with the introduction of eight new markets, six of which are regional routes within South America. LATAM’s expansion from Lima should allow the company to leverage North-South traffic flows for connections through what is its third largest hub measured by seat deployment. Despite bleak economic conditions in many Latin American countries, LATAM continues to leverage its diversified network to grow in markets where it faces few, if any, competitors.
The weakness in Brazil’s domestic and international markets remains status quo. However, conditions in the country’s domestic environment do not appear to be deteriorating as rapidly, which is a welcome sign for LATAM because Brazil still represented 28% of the company’s system capacity in 2Q2016.
Argentina’s domestic market is poised for more rapid domestic growth driven by further expansion at Aerolineas Argentinas and intensifying competition. Aerolineas has focused primarily on domestic expansion since its renationalisation in 2008 and continues to grow its domestic fleet.
Argentina’s domestic market grew by approximately 60% from 2011 to 2015, driven entirely from expansion at the Aerolineas Argentinas Group. Competition during this period was limited by the restrictive and protectionist policies of the previous government, enabling Aerolineas to increase its market share without having to fend off expansion from its local rival LATAM Argentina, or potential start-ups.
Under the more liberal policies of Argentina’s new government, LATAM Argentina is now free to expand. New airlines are also able to launch, starting with a regional start-up backed by Avianca parent Synergy and a potential new affiliate of the Latin American LCC group Viva. Aerolineas is responding to the prospect of new competition by pursuing more domestic expansion.
Brazilian airline Gol is attempting to respond to deteriorating and fast changing conditions in the country with network adjustments to minimise the effects of a sharp drop off in corporate demand. All airlines operating within the country are doing so against the backdrop of a contracting economy, ballooning inflation and a plummeting currency.
Gol is adjusting its US service to Miami and Orlando via Punta Cana to seasonal as those routes are becoming more challenging due to exchange rate pressure dampening demand. The airline has also faced stiffened competition on US routes from rival Azul. In turn, Gol now plans to challenge Azul on new domestic routes from Campinas as part of its network overhaul.
As economic weakness remains an overhang in Brazil, Gol is also adjusting its aircraft delivery schedule for 2016-2017, and increasing the number of aircraft it plans to sublease year-on-year during the 2016 slow season. Its network and fleet modifications are responses to challenging conditions that show no sign of improving in the short to medium term.
Brazilian Airline TAM of the LATAM Airlines Group has continued to expand internationally during 2015 even as it has revised its domestic capacity forecast from flat to a reduction of up to 4% for the year amid a continuing weakening economy in Brazil.
Some of the international build up is occurring from Brasilia, where TAM has also made a regional domestic push in 2015. TAM is also continuing studies of the establishment of a hub in the northeastern region of Brazil to enhance its trans-Atlantic network. The airline’s evaluations show that despite Brazil’s economic weakness, it is necessary to have a strategy in place to exploit the demand once the economy starts to rebound.
TAM remains the international market share leader among Brazilian airlines, and has the strategic advantage of capitalising on the network of the LATAM Airlines Group to balance the weaker conditions in Brazil. But Brazil will likely continue to drag down LATAM’s fortunes in the short term.
Azul believes Brazil-Buenos Aires service is unviable, partially driven by fifth freedom competition
As the major US airlines sought improved access to Latin America in the 1990s, Brazil and Argentina were persuaded - with some reluctance - to agree to open skies bilateral conditions. One consequence of this liberal environment has indirectly been to open up fifth freedom access between the two countries.
Brazil’s third largest airline Azul concludes now that it cannot profitably serve Buenos Aires, due in part at least to the participation of third country airlines. Buenos Aires is a market in high demand among its customers, but the abundant capacity, including from airlines operating fifth freedom services through Brazil to Argentina, puts this out of the question.
With Buenos Aires unviable for Azul in the short to medium term, it looks as if the airline will focus on more international expansion to the US until its Airbus A350s begin arriving in 2017.
Azul is also keen to strengthen its existing partnership with United and initiate a tie-up with JetBlue, which has a strong presence in Azul’s US markets. Those aspirations likely exclude any consideration by Azul of examining a potential partnership with Gulf airlines.
Air New Zealand is boldly moving forward with its longstanding aspiration to serve Latin America by announcing plans to launch service to Buenos Aires in 2015. The new Auckland-Buenos Aires route is made possible by a new partnership with Aerolineas Argentinas, which will provide connections within South America and local sales support.
For Air NZ, Buenos Aires fills the last major white spot in its network following the upcoming resumption of services to Singapore. Argentina has proven to be a challenging market for foreign carriers but for Air NZ it represents the best South American option with a risk level that is acceptable with the right partnerships.
For Aerolineas, codesharing with Air NZ provides an opportunity to add New Zealand and Australia back to its network. Aerolineas pulled out of the Southwest Pacific market in Apr-2014, leaving a void which Air NZ is eager to fill as it has the aircraft type and connections to succeed where Aerolineas failed.