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Argentina is the second largest country in South America, has 34 airports and multiple regional carriers. Aerolíneas Argentinas is the nation’s flag carrier and the largest domestic and international airline, based at Buenos Aires International Airport (Ministro Pistarini International Airport). Domestic services are based out of the domestic airport Aeroparque Jorge Newbery. Aerolíneas Argentinas' sister company, Austral Líneas Aereas, is the second largest airline.
Comando de Regiones Areas (CRA) is the safety and navigation service provider for Argentina’s airspace. The Ministry of Transport and Civil Aviation (DAC - Departamento de Aviacao Civil) oversees and regulates the airspace.
Airports in Argentina
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Latin America’s powerhouse LATAM Airlines Group believes it has turned a corner in its Brazilian operations after enduring weak margin conditions within Brazil’s domestic environment since the merger of LAN and TAM officially closed a little over a year ago.
The company’s overall 3Q2013 results were somewhat buoyed by a 19% improvement in Brazilian domestic unit revenues year-on-year as LATAM slashed its supply within Brazil by 6% during the quarter. For the 9M2013 time period LATAM’s ASKs within Brazil contracted by 9%.
While the rebound within Brazil in commendable LATAM still faces challenges with respect to the devaluing of the BRL, which fell 13% during 3Q2013 against the USD. LATAM is attempting to blunt the effects of currency fluctuations through hedging schemes and transitioning TAM’s debt to the LATAM balance sheet, which is denominated in the USD.
Aerolineas Argentinas is focusing on further expansion in the short-haul market, where it continues to benefit from protectionism. The government-owned carrier has committed to purchasing 20 additional 737-800s, growing a narrowbody fleet which has already been renewed since renationalisation in 2008.
The flag carrier has incurred stiff losses since renationalisation despite trying to improve its position through network adjustments, fleet renewal and new partnerships including membership of SkyTeam. Aerolineas continues to work on improving its highly unprofitable long-haul operation but the carrier is now primarily focusing growth in the domestic and – to a lesser extent – the regional international sectors.
Domestically Aerolineas benefits from a lack of competition as Argentina is not open to new entrants including low-cost carriers. Its only main domestic competitor, LAN Argentina, has been unable to expand and has had to overcome numerous challenges, including a recent attempt to evict the carrier from its maintenance base which could have forced it to withdraw from the domestic market.
JetBlue plans to introduce its first destination south of the equator in Nov-2013 with new daily service from Fort Lauderdale in South Florida to Lima in Peru. The move is consistent with the carrier’s plan to use Fort Lauderdale as a springboard into Latin America as JetBlue indicates more international service from the airport is in the pipeline.
JetBlue is also seizing a prime opportunity to introduce low-cost competition in market where the only LCC presence is a single weekly flight operated by Spirit Airlines. Other carriers operating in the South Florida-Lima market are oneworld partners American Airlines and LAN and Star Alliance member TACA Peru.
Services JetBlue has launched from Fort Lauderdale to Latin America appear to have a short maturation time, which results in the carrier looking to harvest more of those opportunities to balance out new market introductions that take longer to mature. JetBlue has identified about 20 potential new markets in Central America, South America and the Caribbean that are viable from Fort Lauderdale.
Aerolineas Argentinas is aiming to turn around its unprofitable long-haul operation by renewing its widebody fleet, adding capacity to several existing destinations and implementing codeshares with its SkyTeam partners. The airline plans to acquire 12 A330-200s over the next four years, allowing it to replace most of its A340s – the only widebody type in its current fleet.
Aerolineas remains unprofitable, an exception in a Latin American industry which has one of the highest profit margins and growth rates in the global industry. Aerolineas and its highly protectionist government owner are often criticised by more successful Latin American airline groups, with a particularly hostile backlash against Argentina taking place at the recent ALTA 2012 Airline Leaders Forum. But Aerolineas has improved its outlook significantly since renationalising and embarking on a restructuring at the end of 2008.
Fixing the long-haul network remains a challenge but the airline’s management team is putting in place the right strategies to give Aerolineas a chance to turn around - and hopefully give the government the confidence to loosen its unhelpfully protective aviation policies.
Brazil's Gol has shifted the focus of its plans to re-launch US flights by applying for one-stop service to Miami and Orlando via Santo Domingo in the Dominican Republic after its attempts to serve Miami via Caracas were denied by the Venezuelan government. Gol’s failed attempt results in American Airlines and Venezuela's Santa Barbara Airlines retaining a duopoly in the US-Venezuela market, and a less desirable route for pick-up traffic for Gol through Santo Domingo.
The decision by the Venezuelan government appears to reflect a trend by the country’s authorities to deny South American airlines access to the US through Caracas. Aerolineas Argentinas earlier this year attempted unsuccessfully to secure authority to route its new second daily Buenos Aires-Miami frequency through Venezuela’s capital. Aerolineas will now launch the new flight as a non-stop service in Dec-2012 (it already operates one daily non-stop between Buenos Aires and Miami).
Meanwhile, smaller Caribbean carriers are trying to fill the void in the under-served US-Venezuela market by offering more one-stop connections via the Caribbean to circumvent the restrictive air transport agreement between the US and Venezuela.
Aerolineas Argentinas formally joined the SkyTeam Alliance on 29-Aug-2012, completing an important component in the flag carrier’s strategy to reverse several years of unprofitability and lacklustre service standards. SkyTeam will allow Aerolineas to virtually expand its relatively small and highly unprofitable international network as the carrier aims to quickly start codesharing with several current and prospective members. But the alliance alone will not fix Aerolineas’ deep-rooted problems and the government-owned flag carrier still has to overcome several challenges to achieve sustained profitability.
For SkyTeam, Aerolineas Argentinas fills an important white spot in South America, a fast-growing region where the alliance previously lacked any local members. But SkyTeam still badly lags behind oneworld and Star in the increasingly important Latin American market. The alliance is now striving to woo Brazil’s Gol as a new member, which would allow SkyTeam to close the gap with its rivals.