2001 was one of the worst years in Argentine aerocommecial industry, not to say the worst. The same is said about all the country, but in the case of commercial aviation, the grave crisis it drags since a couple of years worsened because of the 11^th September attacks in the United States, and with the devaluation and the financial lock, thing worsened even more.

Passengers preferred postponing or cancelling their holidays (those who had thought about it) and reservations practically disappeared. The Argentine population’s position is to wait and see what happens, and make decisions after. But meanwhile nobody sells or buys, and the companies continue having expenses.

It seems the 2001-2002 summer season finished before it started and the aero commercial panorama will be very different in March.

Even though ticket sales fell 26.8% in 2001 with respect to 2000(that had already fallen 16% compared to 1999), during the first week of the year the fall had reached 40% and respect to the last fortnight of December (when the crisis had already begun), the fall was 20%.

In the particular case of international flights, the fall reaches 80% in some cases.

Facing the crisis, the people decided not going on holiday or doing it near their residence.

Places like Brazil, Mexico, Cuba and St. Maarten, will not see the Argentines that in other occasions filled their beaches, this year. According to what José Luis Devoto, Dinar director and representative of that company before ALARA (Regular Argentine Airlines Association), “occupation of aircraft is 50% maximum, and it decreases in days with government announcements popular unrest, etc.”.

But the crisis not only involves the fall in the ticket sales, but with the devaluation the prices of spares, insurance, airport fees, fuel and other costs which are in dollars and in many cases must be managed by the parallel market rate.

The main problem is the companies must charge their domestic tickets in pesos and in view of the low demand, and the Sports and Tourism minister’s request, cannot raise them.

The financial lock, which impedes transfers of great quantities of money abroad by the companies, makes the cancellation of insurance policies contracted in London, as well as buying spares, given there is no other way of paying the manufacturers.

This virtual airline blockage can generate the paralysis of the fleet on land through lack of spares, and cannibalisation of planes to obtain missing parts.

Foreign companies threaten

Foreign companies, likewise, threaten with suspending international services if they are still unable to transfer funds invoiced by ticket sales for overseas destinations from this country.

Generally, these companies transfer up to 85% of the collections to their country of origin. And, for the moment, as happens to all multinationals, they cannot transfer fund from Argentina, in addition to the fact that money is trapped in the lock decreed by the ex minister Domingo Cavallo, and that the present government cannot unlock.

For the time being, all the companies that operate international flights have opted for not accepting credit cards for payment. They only accept cash in dollars or pesos, that were first accepted at the official rate of 1.40 pesos per dollar and later at the free rate, that sometimes passes 2 pesos per dollar.

A director of the Junta de Representantes de Compañias Aereas” (Jurca) said with regards to the hike of the rates that “to us, the fuel, the catering, the aircraft leasing and the spares cost in dollars. So we have to charge the tickets in dollars”.

For the moment, United Airlines, and British Airways have already announced cutbacks of up to 50% in services to the country, whereas Malaysian Airlines lifted its stopover in Argentina.

National in trouble

National companies were already dragging a grave crisis, especially Aerolineas Argentinas-Austral and ARG , both holding creditors meetings.         

Their costs maintain in parallel market dollar rates, while the tariffs are in pesos. To that we must add a price war that started last October and that has taken the ticket prices to similar values as those of the buses.

Although it made plane trips more attractive for the passengers, the profit margin is minimal. As José Luis Devoto explained, little more than half the companies’ costs are in dollars.

In ARG they are very worried because the aircraft leasing has become non payable and they are negotiating with the companies owners of the planes the reduction of fees, but the proprietors are already trying to recover their aircraft. On the other side it is heard that they will return 6 Boeing 737 or that the Boeing 737-700 will cease to operate, only remaining with the 737-200, given the demand decrease renders them unnecessary and their cost unacceptable.

Meanwhile, people from the company said the plan was to replace the 737-700 by 737-300 from Delta airlines, but the American company does not intend delivering them.

Company speakers denied the return of the aircraft and a reduction in the number of routes and frequencies, even though some days back, an executive from the company, Guillermo Francos, said “we are trying to keep the saucers in the air so the least people possible are harmed”.

Nevertheless, the company situation seems to have changed after a meeting held  by the president of the Nation, Eduardo Duhalde, and one of  ARG’s owners, Eduardo Eurnekian, also majority shareholder of the Aeropuertos Argentina 2000 consortium.

At the meeting, Eurnekian would have promised  the continuation of ARG’s operation to the Argentine president, in exchange for renegotiating the  Tender conditions for the 33 airports that his other company administrates, someting Duhalde would have accepted thinking in the ammount of employment that would be lost facing the fall of the second airline of the country.

Not reaching an agreement with the state, other people, close to Eurnekian, said the impresario does not discard the bankruptcy of the company, that is in a creditors meeting process with accrued liabilities for 120 million dollars and is generating losses.

AeroVip, which had been bought by Eurnekian to Sebastián Agote, was resold, 80% of it, to its previous owner, and there is talk that it will start operating as AeroVip and not under the name ARG Express as it does now.

Despite the company does not have a sales system of their own, now that it uses ARG’s, it has a small structure with which it will be able to function. the way Southern Winds does.

In the case of Dinar, the company owner of two of the DC-9 planes with which the Argentine line flies is struggling to take away the aircraft, given that Dinar is not paying the leases since a month and a half ago due to the impossibility of transferring money overseas.

Although the foreign companies understand the situation, they prefer to take the planes back to continue without collecting.

As all the companies, Dinar did not raise its domestic tariffs, though they do not discard hikes if the fuel price goes up. Besides the company owned by the Desimone family launched an advertising campaign promoting regular flights to Brazil.

Southern Winds is not better either, and as the previous ones it suspended part of its staff, 20 pilots between them.

According to its press manager, Encarnación Ezcurra, “people are travelling the weekends. The full planes are the ones to on Fridays and the ones from on Sundays. We believe there will be an improvement in the second half of the month”, she stated.

Anyway occupation is 65%, a low level for the season, but acceptable.

According to Ezcurra, given the company uses fifty seat planes like the Dash 8 and the Regional Jet, and that the company was in a better situation than the others when the crisis started, the fall is not too noticeable and that is why they will not increase prices yet.

Also, the international plan that includes incorporating two Boeing 767-300, the first one in March to Miami and New York, continues. In this respect, crews have flown to Brazil and Stockholm to begin instruction on the 19^th of January.

Many of these companies’ pilots have already opted for leaving the country towards Malaysia, South Africa and Europe, and Lan Chile has already hired some of them.

The other company in a complicated situation is Aerolineas Argentinas, also in creditors meeting. Although they opted for the free dollar rate for the international routes, they are the only ones that have already announced (through a great advertising campaign) they will keep the domestic flight rates in pesos and at the present rates, but with limitations for the offers.

As part of one of the first measures since devaluation, foreseen salary reductions of around 20%, through which the president of the company, Antonio Mata, hoped to make the company profitable, were suspended

The other important company in the country, LAER, Lineas Aereas de Entre Rios, had to suspend plans to fly overseas with the newly incorporated Fokker F-28, although on Friday 19^th it started regular flight from Paraná to Buenos Aires. Its quality manager, Ignacio di Prospero , announced a pool had been made with all the operators to help each other with the materials and spares that would be needed owing to the limited amount that exist in the country, and that it is practically impossible to import them.