Airline Weekly - November 30, 2015
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Airline Weekly - November 30, 2015

Improbable Land of Opportunity? Argentina might not top most lists of promising airline markets. But that could be changing.

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Cover Story

Improbable Land of Opportunity? Argentina might not top most lists of promising airline markets. But that could be changing.

On Nov. 16, Tony Tyler named names. Speaking in San Juan, Puerto Rico, at an event hosted by the Latin American & Caribbean Air Transport Association, the IATA chief fingered two Latin American countries in particular for “misguided policies and decisions.” One, unsurprisingly, was Venezuela. The other: Argentina.

Criticizing Argentina for bad government policies is, to be sure, no great break with convention. But could Argentina’s days of being mentioned in the same breath as Venezuela be numbered?

IATA’s charge, after all, comes at a pivotal time for the country, a time of great hope for airlines as a new president takes office. Mauricio Macri represents a sharp break with Argentina’s populist past, promising a more open and pro-business economy, an end to foreign exchange controls, better relations with the U.S., a truce with foreign bondholders and, yes, new aviation policies.

One thing Macri speaks of doing is ending or at least curtailing subsidies for Aerolineas Argentinas, which has been 100% state-owned since its nationalization in 2008. Losing this largesse would naturally lead to big changes in the way Aerolineas manages itself—and big opportunities for rival airlines able to finally compete on a more level playing field.

An end to the era of enormous subsidies for Aerolineas is still just a promise, not a fact. And similarly, talk of a possible re-privatization is for now just that: talk. But one thing that’s certain is that the new government will install a new CEO for the airline, reportedly a former auto executive with experience negotiating with Argentina’s strong labor unions. Gol too, by the way, in neighboring Brazil, is itself run by a former auto executive. Interestingly, the CEO of LAN Argentina will become one of the new president’s chief economic advisors—he’s someone who presumably values the importance of aviation to economic growth.

In 2012, Airline Weekly called Aerolineas Argentinas a candidate for world’s most dysfunctional airline, losing enormous amounts of money, as it was, even during the long economic boom throughout Latin America, which ended only recently. But although red ink continues to spill, the carrier has made some improvements. In that same year 2012, the carrier joined SkyTeam and has since expanded cooperation with international partners, including Gol... (392 of 1,568 words)

Also Inside this Issue:

The past few years haven’t been kind to AirAsia, the eastern world’s largest LCC. ASEAN region overcapacity, heavy losses at joint venture airlines, questions about its accounting, weak local currencies and even a fatal accident all conspired to drive its share price down by almost 50% in the past 12 months. Is the worst behind it?

Conditions at home in Malaysia are indeed improving, thanks in large part to mass downsizing by Malaysia Airlines as it navigates its way through a post-bankruptcy future. It helps that Chinese demand to the ASEAN region is bouncing back strongly. And cheaper fuel is a blessing. But losses in Indonesia, the Philippines and India persist. AirAsia’s close relative AirAsia X, meanwhile, continues to lose money. And back at AirAsia itself, an already-complex corporate empire will grow more complicated still with the re-launch of AirAsia Japan next year.

As expected, Aegean Airlines had a good Q3—most of Europe’s airlines, after all, reported excellent summertime demand. Aegean’s test, as always, will be how it manages the off peak.

Elsewhere in Europe, Lufthansa narrowly avoided yet another flight attendant strike and secured a new ground worker contract. But unions remain angry about Eurowings, a low-cost unit with some resemblance to Europe’s big tour operators. One of these tour operators, by the way—Thomas Cook—might be open to selling its airline.

Speaking of selling its airline, Azul sold almost a quarter of itself to the parent company of China’s Hainan Airlines. It’s another sign of just how tough the Brazilian market is right now.

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