Once Argentina had devalued its currency, Chilean citizens, benefited by the rate of exchange, crowded into the stores in the cities of Buenos Aires and Mendoza, ready to buy everything (or almost everything) they found in their path.

This situation did not go unnoticed by the airlines flying this side of the Andes. These companies had to face a fuel increase of over 150% generated by the dollar shooting up and the difficulty of keeping up payments for spare parts, insurance, plane leasing and other obligations contracted in US currency.

The increase in costs and the decline in the sale of tickets (approximately estimated to be 1 million) created the necessity for some operators to stake on regional and/or international flights to raise their takings in dollars and thus face the increasingly difficult scenario.

In March this year already, at a price of U$S 110 per stretch, SW (Southern Winds) inaugurated its route Jorge Newbery Airport-Mendoza-Santiago de Chile using 50-seat Regional Jet aircraft with three daily frequencies. According to the head of press for the company, Encarnación Ezcurra, results were very good, though the unprofitable stopover at Temuco (Chile) had to be folded after a few flights.

As for Jorge Vuletich, General manager for American Falcon, a company that started with charter flights and grew in importance when it purchased Dinar, he also said they would start flying to Santiago de Chile and Puerto Montt.

The American Falcon flights having Santiago as destination will take off from Ezeiza in code share with Alitalia, though also acting as feeder line for United Airlines, Lan Chile, Lloyd Aereo Boliviano, British Airways, Air France, Qantas and Lufthansa. The company will fly its Boeing 737-200s once a week (with the intention of enlarging the frequencies to two or three in the future) towards Puerto Montt, the closest Chilean destination that SW gave up on account of its scant commercial success. Departure will be from Jorge Newbery Airport, with a stopover in Bariloche.

According to Vuletich, who confirmed the company is also contemplating the possibility of flying to Pucón, these flights would begin when the Chilean government grants the permits, although he added that they hope to start operations in September. SW and American Falcon flights from the Jorge Newbery Airport show the users’ interest in operating from a centrally located airport in the city of Buenos Aires, even though the planes must stop over at some other Argentine town.

While American Falcon’s stake is somewhat risky in the case of its route to Puerto Montt, the fact they are the feeder line for other companies could mean good profits in the frequencies to Santiago, even though it must compete with the experienced Aerolineas Argentinas and Lan Chile when departing from Ezeiza.

Another regional destination that obtained the interest of local firms is Montevideo, which AIRG stopped serving some time ago to hand over the route to Aerovip, an enterprise in which Eduardo Eurnekian, majority shareholder of AIRG, also holds stock.

American Falcon began to cover this destination on 1 April; it is becoming fruitful, with occupancy of between 65% and 70%, according to Vuletich. These flights take off frrom Ezeiza.

Aerovip, the smallest company in the sector by size and age, is profiting from its daily flights to Montevideo and Punta del Este, charging a rate of U$S 50 and flying 19-seat Bae Jetstreams.

SW is also trying to gain access to these two routes with its Regional Jets, even though it only intends to fly to Punta del Este during the summer.

Aerolíneas Argentinas and the Uruguayan Pluna and Airclass must be added to the three companies mentioned above. The last mentioned operates an Embraer Bandeirante to link Montevideo, Colonia and Buenos Aires twice a day, offering the only option of flights to Colonia.

For Latin America

While SW has projected a larger number of regional flights, it has still to begin operating them. The routes to Porto Alegre (Brazil, via Rosario), Tacna (Chile, via Córdoba), Santa Cruz de la Sierra (Bolivia, via Córdoba) and Asunción del Paraguay (via Resistencia) have already been assigned, but SW is still hesitating about exploiting them. The same applies to the Buenos Aires-Sao Paulo frequency.

Encarnación Ezcurra, spokeswoman for the company, explained that at this time they are reserving all their impulse for operating long-distance international flights to Miami and Madrid.

The company is also awaiting the permit to arrive in Lima, but in this case it will depend on the signature of an agreement between the Argentine and Peruvian governments, which would allow the increase of frequencies for each country (from 7 to 21) as of 1 December, and to 28 as of 1 July next year. The total liberation of traffic (open skies) would take place as of 1 December 2003, thus making the fifth liberty traffic possible.

As to Aerolíneas Argentinas, it did not increase the regular flights to the regional destinations of Santiago de Chile, Sao Paulo, Montevideo, Asunción (sharing code with TAM Mercosur), Punta del Este, Santa Cruz de la Sierra, Lima and Caracas.

According to Julio Scaramella, head of press for the company, Aerolíneas is not interested in operating from Aeroparque (it only uses it for flights to Uruguay) and prefers to have a strong hold on these destinations before tackling any new ones.

The company focused on increasing the number of passengers through its promotion “The world in pesos”, with rates of 549 pesos (U$S 152, according to the rate of exchange before closing this column) to Rio de Janeiro o Sao Paulo and 899 pesos (U$S 245) to Caracas, obtaining an occupancy rate of 62.2%.

Although Aerolíneas did not enlarge the frequency of these services, it took advantage of the increasing number of tourists coming from Brazil to spend the winter here. This amount grew by 27% as compared with 2001 and for this reason, the company decided to start charter flights from Sao Paulo to Bariloche, with a stopover in Buenos Aires. “The airbus 340s had 100% occupancy,” assured us Scaramella.

Undoubtedly, the low rates offered by the local airlines are stimulating enough for foreign tourists to choose them and for this reason, companies such as Varig have decided to cut down on their services in Argentina.

The analysis

Let’s go fly

On account of the country’s present situation, Argentine companies are compelled to pay more attention to the foreign market than to the domestic flights. They are cutting down or canceling domestic routes that are not very profitable, and concentrating their efforts on international flights carrying foreign tourists, both abroad and to the tourist destinations in the country.

Southern Winds’ great stake on regional and international flights could become a headache if they do not get the expected response from the passengers, but a good handling of the situation, especially facing the great competition of Aerolíneas Argentinas, might consolidate the company’s second place in the country, which it practically holds already.

What was at some point the Argentine flag airline is developing a more and more aggressive strategy for selling tickets, with such excessively low rates, that they make competition impossible. Besides, the re-incorporation of many routes, especially in Europe, is recovering for Aerolíneas the polish it once had before the disastrous sale to Iberia and the SEPI. The charter flights are in turn benefited from belonging to the Marsans tourist group, since Aerolíneas Argentinas planes are used to carry contingents of tourists who buy packages from the company, as in the case of the Madrid-Puerto Vallarta flights.

The merger of AIRG and Southern Winds will considerably change the outlook, since it will hinder the survival of the smaller operators and will be the great competitor of Aerolíneas Argentinas. But all this will depend on the possibility of a good income in dollars to cover the costs in that currency and thus survive. For this reason, everybody must fly abroad!