Aerolineas Argentinas Part 1: domestic expansion and a new commercial strategy to combat new LCCs

Aerolineas Argentinas is planning further rapid domestic expansion ahead of the launch of new competitors, including Argentina’s first LCCs. The government owned airline group expects to grow domestic traffic by approximately 20% in 2017, to 10.5 million passengers, enabling it at least to maintain and potentially grow its market share above the 77% share achieved in 2016.

Argentina’s domestic market is expected to double in size during the first four years of the Mauricio Macri administration, which took over at the end of 2015. Aerolineas is already tracking ahead of its target of 50% domestic traffic growth for the four years ending 2019 and is preparing a new commercial strategy to fight off new LCC start-ups.

The Argentinean domestic market is on the cusp of a tumultuous and dynamic period – as is the case when an LCC enters any domestic market for the first time.

However, Aerolineas benefits from a government mandated price floor which will prevent any new LCC competitor from offering bargain basement fares – typically an integral component of the low cost model.

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