- CAPA Analysis
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- Torre Bouchard, Calle Bouchard 547 Piso 8
- Main hub
- Buenos Aires Aeroparque Jorge Newbery Airport
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- Full Service Carrier
- Domestic | International
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- Part of Aerolíneas Argentinas S.A.
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Air New Zealand
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Aerolineas Argentinas commenced operations in Dec-1950 and is the national airline of Argentina. The carrier, together with regional airline, Austral Lineas Aereas provides services throughout Argentina and to destinations across North and South America as well as Europe. Aerolineas operate from two hubs in Buenos Aires, with Aeroparque Jorge Newbery Airport used for domestic and regional international services and Ezeiza International used for long-haul services. Aerolineas and Austral comprise the Aerolíneas Argentinas SA group, which is majority-owned by the Argentine government. The carrier utilises a mixed fleet of narrow and wide-body Airbus and Boeing aircraft. In Aug-2012, Aerolineas Argentinas became a member of SkyTeam, the first South American member of the alliance.
Location of Aerolineas Argentinas main hub (Buenos Aires Aeroparque Jorge Newbery Airport)
23 total articles
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.
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.
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.