In 2023, Argentina elected Javier Milei as president, an ultra-libertarian who is trying to take state involvement out of as many industries as possible. In late 2023, Milei announced plans to start allowing foreign airlines to compete on domestic routes within Argentina. This is now one step closer to becoming a reality…
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Argentina to fully open up to foreign airlines
Each country has its own aviation policy, which dictates what kind of flights airlines can operate, to, from, and within, that country. When it comes to international flights between countries, some governments have Open Skies policies (where unlimited service between select countries is permitted, subject to certain requirements), while other governments have bilateral agreements (where the number of frequencies between countries is specifically negotiated, and could come with lots of stipulations).
It’s incredibly rare to see a country allow foreign airlines to provide domestic service within a particular country, especially with pick-up and drop-off rights. However, Argentina could be among the first to allow that. On September 23, 2024, Argentina’s government signed Decree No. 844/2024, which essentially deregulates domestic flights in Argentina, and allows flights to be operated by foreign airlines. The new decree will come into force 60 days after it was issued.
Essentially lifting all restrictions on international airlines is a major move that’s more or less unprecedented. For example, the United States participates in an Open Skies treaty, whereby airlines from other countries participating in the treaty can offer unlimited service to the United States. However, we still maintain bilateral treaties with countries that aren’t part of that agreement, and don’t allow foreign airlines to operate domestic flights (at least not that they can sell tickets on point-to-point).
This development comes as Milei is trying to privatize national carrier Aerolineas Argentinas, but is facing significant challenges with accomplishing this, especially with labor groups.
My take on Argentina opening up its skies
While I certainly have my concerns about Milei, I don’t necessarily think a country like Argentina adopting a full Open Skies policy is the dumbest idea ever. A few thoughts, both positive and negative:
- More air service to a country is generally good for the economy, and lifting the red tape on new service is ultimately a positive
- Historically the South American mega carriers (like Avianca and LATAM) needed to set up subsidiaries in each country where they wanted to have significant operations, so there’s something to be said for the simplicity of being able to add service without needing to deal with that bureaucracy
- I can’t imagine we’ll see that many other airlines suddenly serving domestic routes in Argentina — I don’t think Qatar Airways will be tempted by the prospect of hourly service from Buenos Aires to Cordoba, but I could be wrong 😉
- There’s also the issue of airlines being able to get money out of Argentina for operating domestic flights, especially given that the currency hasn’t exactly proven stable over time
- There’s not some amazing labor arbitrage opportunity here, like we’d see if foreign airlines were allowed to operate domestically in the United States
So we’ll see how this plays out, but given the state of Argentina’s economy, I don’t think this is the wildest idea ever. For example, LATAM Argentina ceased operations in 2020, so maybe an Open Skies policy to this extent would cause LATAM to once again add more service from Argentina… who knows. It’s definitely not good news for existing players, though.
Bottom line
Argentina’s president is putting plans to liberalize aviation restrictions into action. Thanks to a new law, it will soon be possible to foreign airlines to operate domestic flights within Argentina. There aren’t many countries with such open policies, so I’m curious to see how this plays out.
What do you make of Argentina’s Open Skies policy?
There's no pragmatic reason to not allow this worldwide. If a European company can for example run a restaurant in Brazil, why shouldn't they be able to run an airline in Brazil? There's no difference in the principle. The only issue is reciprocity (it would be unfair for one party to face competition while the other has its own market protected), ergo historical reasons.
Kudos to Argentina, I hope this becomes more widespread across the world.
"I don’t think Qatar Airways will be tempted by the prospect of hourly service from Buenos Aires to Cordoba, but I could be wrong "
The issue is that an airline with tons of money (middle east oil backed) can flood the market with low fars, put the competition out of business, and then use their monopoly power to jack up prices. And because the cost of entry is so high, the only other unit...
"I don’t think Qatar Airways will be tempted by the prospect of hourly service from Buenos Aires to Cordoba, but I could be wrong "
The issue is that an airline with tons of money (middle east oil backed) can flood the market with low fars, put the competition out of business, and then use their monopoly power to jack up prices. And because the cost of entry is so high, the only other unit that could complete would be another oil funded national airline.
Transportation in general is highly regulated because it's so important. You need either a lot of competition to keep fares low ( and use regulation to block consolidation) or have a subsidized national airline to keep fares in check
The Unions basically killed LatAm Argentina subsidiary with frequent strikes and high wage demands. LatAm packed their tent and walked away.
If Milei wants to privatize government businesses, then he should address the situation with Intercargo - the ground handler at EZE. They have had a monopoly for years on ramp handling and rates are quoted in USD and are exorbitant.
Good on him. I hope his maneuvering wins the day.
Aerolineas lost $8 billion USD in public money since 2008. That's Alitalia level bleeding. And its a junk airline.
In a country where 30% of the country is below the poverty line, if he's barred from selling it off, it'd be a great public service if he can kill it off. Anything less would be failing the interests of the Argentine people
Poverty at a record high in Argentina under this moron.
He is more interested in getting on his knees for the likes of Netanyahu and Musk than improving Argentina.
Actually the poverty is from the socialists before him. He's fixing their mess.
What are you comparing against in order to calculate the 'record'? GDP and associated statistics are effectively useless when calculated on artificial exchange rates. The 2012 per capita GDP for Venezuela was reported as $12,688, and the current level is reported as being less than $4k. Notwithstanding the oil price fluctuations, it's just not realistic to assert that the economy of a country shrank by over 2/3 within a decade.
Milei does have some clear...
What are you comparing against in order to calculate the 'record'? GDP and associated statistics are effectively useless when calculated on artificial exchange rates. The 2012 per capita GDP for Venezuela was reported as $12,688, and the current level is reported as being less than $4k. Notwithstanding the oil price fluctuations, it's just not realistic to assert that the economy of a country shrank by over 2/3 within a decade.
Milei does have some clear ideas and a certain worldview- you may agree or disagree with him, but cannot accuse him of being ignorant and/or incoherent.
I don't think that anyone can claim with any certainty that the implementation of Milei's ideas will be popular enough to secure him a second mandate, and/or, (more importantly) effective enough to solve issues and improve the state of the country, but that's the sort of legitimate risk that voters take when voting for more radical approaches.
I don't suppose you've been following the situation in Venezuela at all. It is entirely realistic for a country's GDP to drop that much when you're talking about an oil-dependent nation that used to produce about 2.5m bbl/d but now produces about 850k bbl/d and has seen an exodus of over 20% of its population.
If poverty is at a record high it is certainly not attributable to Millei - he has been in office only a short time. The economic problems and poverty pre-date his arrival on the scene by 20 plus years.
I don’t think LATAM will reenter the domestic market in Argentina. However, I can see LATAM being highly interested in operating long-haul routes such as SCL-EZE-MIA, SCL-EZE-MAD and SCL-EZE-BCN.
Milei is awesome
100%. He's amazing. I only hope he has the opportunity and is given enough time to turn things around.
Wishing so much peace and prosperity to all Argentinos!
I think any airline will be very wary of this. There is a long history of a change in Argentinian government completely reversing liberation of air travel and protecting Aerolineas. LATAM, Norwegian, PLUNA, Iberia all learnt the hard way.
Let's open up AEP to international. Lets not. Let's encourage competition. Let's kill LATAM. Let's privatise AR. Let's subisidise and protect AR. Let's make fares market based. Let's subsidise fares for locals. Lets subisidise AR fares...
I think any airline will be very wary of this. There is a long history of a change in Argentinian government completely reversing liberation of air travel and protecting Aerolineas. LATAM, Norwegian, PLUNA, Iberia all learnt the hard way.
Let's open up AEP to international. Lets not. Let's encourage competition. Let's kill LATAM. Let's privatise AR. Let's subisidise and protect AR. Let's make fares market based. Let's subsidise fares for locals. Lets subisidise AR fares to protect against low cost.
It may happen but they wont be allocating a lot of capital that can't be very easily reallocated.
Economic and political stability generally hasn't really been a trademark of Argentina for a while.
People have a lot of negative takes on Argentina's president because they associate him with Trump, but let's be honest, Argentina has been a total mess for decades under leaders to the left of Milei. Incremental changes are not going to fix that country, and I say that as an Obama/Biden/Harris voter.
Milei is simply not comparable to Trump. Trump is a buffoon with nonsensical economic policies.
Milei is an actual economist.
Trump also had interest rates at nearly all time lows and unemployment at record lows before COVID. If the current US administration is filled with economists, we're much better off with buffoons and clowns.
Fun fact - the president has very little influence, if any, on the success or otherwise of the US economy.
Hey, Argentina!
Elect a clown, expect a circus.
You've learned nothing from the US experiment in ineptitude of January 2017 - January 2021.
Nor has the US, considering how close its current race is. He very well could come back.
Because it's all going so well now......
it certainly is going VERY WELL. For once my 401k increased almost 100% since the wannabe dictator left power.
"While I certainly have my concerns about Milei"
In what way are you 'concerns' relevant to the article?
did the random one-off innocuous comment offend you snowflake?
This is a blog written by a human, not a bot. Hence, Lucky is free to editorialize and offer asides. You'll find that on every single blog on any topic.
Welcome to the internet.
And this, ladies and gentlemen, is the reason why is libertarianism a bullsh*t, along with other dumb policies this guy have introduced.
Latam will certainly add some domestic Argentina routes including to feed Delta’s flights to the US
Why would they do that? They have hubs at GRU and SCL, and any EZE routes won't be able to command the same yields as AEP (where DL don't fly).
Delta's flights out of EZE tend to have load factors in the high 80s or 90s. They're full and dont really NEED feed. Plus, Delta's ATI with LATAM doesnt cover Argentina, so that could make things more difficult.
Delta can benefit from codeshare destinations within Argentina. And LA will add some domestic Argentina flights. That is not the same as restarting an entire division in the country
I doubt that LATAM will start them from EZE. Or find it worth their while to restart domestic flights from EZE. If anything, Aeroparque or bust for domestic flights. If not Aeroparque, I'd be surprised if they launched any domestic flights within Argentina, and that wouldnt benefit Delta at all.
I am not sure how much more Aeroparque can hold but if it can that will be the choice for domestic flights. My point is also that Delta will be the international’arm’ of cooperation w Latam in Argentina although It is possible that LA could start EZE to MIA
Maybe, but for the most important Argentine cities, LATAM already flies from them to hubs in Lima, Santiago, and Sao Paulo. Unless there's some amazing amount of international traffic that LATAM isnt getting with that, there's no way they'd want to give that revenue to Delta in a market where they dont share revenue when they could keep it all for themselves. Not convinced that LATAM would find it worthwhile to connect EZE to a...
Maybe, but for the most important Argentine cities, LATAM already flies from them to hubs in Lima, Santiago, and Sao Paulo. Unless there's some amazing amount of international traffic that LATAM isnt getting with that, there's no way they'd want to give that revenue to Delta in a market where they dont share revenue when they could keep it all for themselves. Not convinced that LATAM would find it worthwhile to connect EZE to a handful of Argentine cities just to provide connections to Delta's once daily Atlanta flight and seasonal JFK flight,and have to give the majoirty of that revenue to Delta. Never say never, but doesnt sound like an amazing opportunity.
I never said LA would operate the service solely for Delta’s benefit
And do you also realize that DL and QR are both part owners of LA and could both benefit from narrow body domestic feed in Argentina?
The only way this might work is if DL could find a way to fly to AEP. Although ATL's just about within the range of an XLR, it doesn't seem like a good idea.
Yes, I know that DL and QR own stakes in LATAM, but I dont think that moves the needle. Just because there's a minority stake does NOT mean they will do everything they are told to do, and LATAM has way better uses of their planes than this.
Also, QR isnt flying to Buenos Aires now. Do your research.
Delta is already filling their plane out of Argentina on average high 80s/ low...
Yes, I know that DL and QR own stakes in LATAM, but I dont think that moves the needle. Just because there's a minority stake does NOT mean they will do everything they are told to do, and LATAM has way better uses of their planes than this.
Also, QR isnt flying to Buenos Aires now. Do your research.
Delta is already filling their plane out of Argentina on average high 80s/ low 90s. I dont think that LATAM will start some flights just to feed the once a day flight to Atlanta or the seasonal flight to JFK which LATAM can already feed at its other hubs. They have better things to do with their airplanes.
Never say never, but starting a bunch of tag flights that might have a few connecting passengers and having to rely on lower yielding traffic to fill them (the higher yielding domestic customer will fly to Aeroparque every time) doesnt seem like a viable plan to me, but stranger things have happened.
Other than LATAM and Chile's Sky Airline, I can't see anyone who might be interested in setting up any kind of domestic routes within Argentina- after all, it's not a huge market. Gol are certainly very interested in the Argentine market, but they probably won't want to directly compete against Aerolíneas.
I would add JetSmart (already there to some degree) and possibly Avianca.
But the limiting factor is the frail economy and slots at AEP, which are scarce. EZE is no option for domestic service.
The folks in Phoenix (indigo) are probably adjusting order books around as we speak.
The AAdvantage program and AA are already well-established there and JetSmart can immediately take AAdvantage of that. A JetSmart hub in Buenos Aires would make a lot of sense.
I'm sure LATAM will try as well but JetSmart seems like the easy one to bet on but the access to AEP will be a struggle for any new airline
Guess I missed the memo about the existence of JetSmart Argentina at AEP and EZE.
I suppose the better question will be to see if Indigo expands or does more in Argentina even though they have a local subsidiary already. Seems like the ability to move planes in/out of SCL more easily around Argentina could help
The far right psycho in charge of the country really has it in for Aerolineas Argentinas, as he clearly wants them to go out of business.
For a country desperately trying to curb inflation, it doesn't make a ton of sense for poverty-stricken taxpayers to be subsidizing over-market union wages that are simply negotiating with the government, not the market.
Aerolineas Argentinas needs to come to grips with how to be a company rather than an unneeded state subsidy for a broke government.
It wouldn't be trying to curb rapid inflation if it wasnt for the moron in charge!
vlcnc,
blaming inflation on the current president vs the RAMPANT inflation before him? really? Do you even know anything about the inflation rate before Milei? I'm not suggesting he's perfect but you have to be completely ignorant to blame the inflation in Argentina on him.
He's made it worse. Do keep up.
I do. learn something about economics and what he inherited
It only kept getting worse because it was so bad, to the point it's almost beyond repair. He however has had the first months without price increases in years, so what are you talking about. A situation like this is probably going to get worse before it gets better. But it's better than just feeding the beast and keeping it ridiculous. If things are so great in Argentina, why dont you go live/work there and...
It only kept getting worse because it was so bad, to the point it's almost beyond repair. He however has had the first months without price increases in years, so what are you talking about. A situation like this is probably going to get worse before it gets better. But it's better than just feeding the beast and keeping it ridiculous. If things are so great in Argentina, why dont you go live/work there and earn in Argentine pesos? You need to read about the previous presidents and policy. Argentina has been a basket case way before Milei came to power.
But you say it's Milei's fault as he's been in power for maybe a year; was it Bush's fault for 8 years under Obama? Obama blamed Bush for his entire 8 years in office....
Lol He's saved Argentina from failed socialist policies. The facts speak for themselves.
@Andys
Perhaps in your delusional mind increased poverty and decreased GDP mean success. The facts speak for themselves for indeed, not for you tho.
May god bless Argentina to overthrow this b*tch!
Not Qatar, but could we see someone like Ryanair or EasyJet or Jetstar create an Argentinian operation? That'd be interesting
Meh, their economy is in the toilet. Not worth it.