Argentina recently elected Javier Milei as president. The ultra-libertarian is trying to take state involvement out of as many industries as possible. I’ve written about his plans to privatize Aerolineas Argentinas (or more accurately, to “hand it over” to employees). That’s not the only major aviation policy change he has in store, though…
In this post:
Argentina could 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 select requirements), while other governments have bilateral agreements (where the number of frequencies between countries is specifically negotiated, and could come with lots of stipulations).
As reported by Clarin, Argentina’s new president wants the country to basically lift all restrictions related to air treaties. This means that airlines from all countries could offer unlimited service not only to and from Argentina, but also within Argentina. That’s right, foreign carriers could start operating domestic routes within Argentina.
The only requirement for airlines to offer this kind of service would be them demonstrating “technical and financial solvency.”
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).
My take on Argentina opening up its skies
While I think the concept of handing over Aerolineas Argentinas to employees is ridiculous, 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 😉
- It’s interesting to basically “unleash” Aerolineas Argentinas and hand it over to employees while at the same time putting the airline in a much worse place competitively; it also makes it a lot less likely that another company would invest in Aerolineas Argentinas
- 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 new president plans to liberalize aviation restrictions in a major way. In addition to privatizing Aerolineas Argentinas, he essentially plans to lift all restrictions on new air service. Airlines from all countries would be allowed to offer unlimited service not only to and from Argentina, but also within Argentina. I’m curious to see how this plays out.
What do you make of Argentina’s planned Open Skies policy?
There's a ton of uncertainty surrounding Argentina's currency, and the last thing carriers want, is to get involved in another Venezuela or Nigeria situation:
...where they can sell lots of seats, for high yield, but not get paid for them due to currency shortages/issues.
Doubt many carriers will be interested, any time soon.
Absolutely correct. I testified in numerous international tribunals related to Venezuela not repatriating funds of foreign carriers.
Buyer be ware!
Argentina is going on USD as their national currency. I think they will be fine.
Argentina is going on USD as their national currency. I think they will be fine.
Not that many analysts share your confidence. They can't just snap their fingers, and say "presto, we're dollarized!"
They've got to stabilize the peso into a semi-reasonable conversion, and that's far easier said than done, considering the current state of their economy + the guaranteed pushback from social and political opposition.
This won't be the first, nor second, time that...
Argentina is going on USD as their national currency. I think they will be fine.
Not that many analysts share your confidence. They can't just snap their fingers, and say "presto, we're dollarized!"
They've got to stabilize the peso into a semi-reasonable conversion, and that's far easier said than done, considering the current state of their economy + the guaranteed pushback from social and political opposition.
This won't be the first, nor second, time that they've tried this since just the '90s.
countries like Ecuador that dollarized weren't exactly at the pinnacle of economic success when they floated the idea or when they implemented dollarization.
And while this is an aviation blog, there will be hundreds of changes made in Argentina to stabilize the economy well beyond essentially privatizing AR. The people voted for the president because the benefits of a highly subsidized economy has not resulted in benefits to enough people while concentrating those benefits...
countries like Ecuador that dollarized weren't exactly at the pinnacle of economic success when they floated the idea or when they implemented dollarization.
And while this is an aviation blog, there will be hundreds of changes made in Argentina to stabilize the economy well beyond essentially privatizing AR. The people voted for the president because the benefits of a highly subsidized economy has not resulted in benefits to enough people while concentrating those benefits in the hands of too many people.
Maybe American will bring back Cordoba via Buenos Aires; they have enough planes sitting on the ground there
nonstop service to Cordoba with the A321XLR is probably a better proposition
Hopefully this will bring down fares. Round trip service from MIA is very expensive currently.
that will come when either Delta or Latam start service from MIA to Argentina which Delta could do using existing bilateral authorities or Latam could do under 5th freedom authority which could come as part of Argentina Open Skies.
and the same is true for MIA international as a whole. AA has enjoyed a monopoly among US legacy carriers to Latin America. That will end and will bring down fares.
it won't happen...
that will come when either Delta or Latam start service from MIA to Argentina which Delta could do using existing bilateral authorities or Latam could do under 5th freedom authority which could come as part of Argentina Open Skies.
and the same is true for MIA international as a whole. AA has enjoyed a monopoly among US legacy carriers to Latin America. That will end and will bring down fares.
it won't happen tomorrow and it won't involve dozens of routes - either domestically or longhaul international all it one time but it will happen.
it is not a matter of if but when.
Confused by how all this will be bad for AA. If anything, given AR will no longer have the government backing their losses, and with investors unlikely to buy stakes in them, couldn't AA just steal their market share and expand further? Furthermore, even if DL and AR isn't as close as DL and LA, losing AR would still be a loss to DL, and even if LA scales up their Argentina operations, it would still be tricky given Argentina's faltering economy
I doubt if AR contributes much if anything to DL and vice versa.
There are Skyteam airlines on the periphery and there are Delta's buds. AR is in the former category.
And AA could pick up more traffic - but their costs, like any foreign carrier - are much higher which means they can't compete for some of the low fare traffic that AR carries.
The best alternative to Argentinian carriers of which there are a couple is other Latin American airlines.
LOL. DL cannot even make MIA-NAS or MIA-HAV work, but they will make MIA-South America work. And just look at MIA-MCO loads, it is more a question of when that also gets dropped. DL will keep expanding their MIA to MSP, DTW, ATL and SLC frequencies (which nobody even wants to fly) and say they are expanding in MIA. Please give me some of that kool aid DL is giving you to spin all this nonsense.
Do you have evidence or do you just like saying things?
Does any airline exec think when the next Peronist president is elected, the system wont revert back to its protectionist state? Argentina lacks governance stability and a currency that attacts airlines to make long term investments.
Being able to operate domestic flights WITHIN a foreign country is called cabotage and is not generally considered part of Open Skies which is unlimited access between foreign markets and a specific country. ie a route from the US to a foreign country other than the home country of the operating airline is a separate right that depends on the treaties of all 3 countries while Open Skies involves rights between TWO countries.
Sean...
Being able to operate domestic flights WITHIN a foreign country is called cabotage and is not generally considered part of Open Skies which is unlimited access between foreign markets and a specific country. ie a route from the US to a foreign country other than the home country of the operating airline is a separate right that depends on the treaties of all 3 countries while Open Skies involves rights between TWO countries.
Sean is right that joint ventures are something in addition to Open Skies but is incorrect that they are allowed because no one enforces their laws. Many countries allow joint ventures and they do it under the rule of law.
It is a given that foreign carriers will add service to and within Argentina IF this is all approved - which has not yet been done. Other countries in S. America such as Gol and Latam will pick off routes within Argentina to add; they already serve some of these routes from countries outside Argentina. You won't see a bunch of foreign carriers flying domestic routes in Argentina using widebodies but the 737MAX and A321NEO can access parts of Argentina from the US and its possessions (which are governed by US treaties) so there could be US carriers operating some - but not many intra-Argentina routes.
The future for AR is even more clouded. They will try to form their own joint ventures with foreign airlines but have to become much more efficient very soon.
Again, if even parts of their new President's proposal is proposed, Argentina will get much more air service and much better service - because that is what competition does.
"Argentina will get much more air service and much better service - because that is what competition does."
I guess you don't remember when airlines competed on service. Airlines like Spirit, Frontier, Ryanair and EasyJet do not provide better service. They grease the skids in a race to the bottom.
you can define "better service" multiple ways - whether it be quantity or quality.
The US has long said that "better service" means lower fares and more access to prime airports for the lowest cost carriers.
The same philosophy is part of why the US has allowed US manufacturing jobs to be exported to lower cost countries - so that US consumers can have lower prices and more choice.
You can argue...
you can define "better service" multiple ways - whether it be quantity or quality.
The US has long said that "better service" means lower fares and more access to prime airports for the lowest cost carriers.
The same philosophy is part of why the US has allowed US manufacturing jobs to be exported to lower cost countries - so that US consumers can have lower prices and more choice.
You can argue whether that is a good goal for a country to have or not but what Argentina proposes for air transportation is similar to the US for manufactured goods.
It is a given that foreign carriers will add more service to/from Argentina even w/o cabotage. If cabotage is approved, Argentinians will see more competition on the busiest domestic routes - which is what the US has - and higher fares on smaller routes which are served by large airlines that try to differentiate themselves w/ a larger network.
both systems do work in multiple countries but few countries allow foreign carriers to fly within their borders. The Southern Cone of S. America is part of a larger economic bloc like Europe and N. America and that is where the greatest integration will come IF it is all approved and IF there are not restrictions on who can fly within Argentina such as reciprocity.
The US will not allow any foreign country's airlines to fly within the US - the largest domestic air travel in the world - so the US will be excluded if reciprocity is required. Chilean airlines (Latam) will be allowed but it isn't even certain that Brazilian airlines will be allowed. Brazil allows 100% foreign investment but does not allow foreign airlines to fly within its borders carrying local traffic.
AR with 145 employees per aircraft may sound high and is often stated as the reason for the huge losses. However Qantas which operates in a much higher cost environment I.e. Wages and Materials has 23,000 employees or 184 per aircraft a still made Aud$ 2.1 Billion profit year ending 30th June 23. What does it tell you someone has had their hand in the till.Argentina once the best economy in the whole of South America now trying hard to equal a third world country
Easy jet is very good. I’ve never had any issues with Ryanair. Considering the millions that travel with them the percentage of unhappy customers is tiny.
I fly easy jet a lot and i think their service puts to shame many airlines including the lufthansa group and the us big 3!!!!!!!!!
Chile allows cabotage. It is unlimited to another country's carriers if reciprocated and limited if not. So watch Chile and Argentina become one domestic market, maybe add Brazil.
I think you might be wrong about foreign carriers operating domestic flights in Argentina. Firstly, carriers from other countries in the region (e.g., Latam, Avianca, Sky, JetSmart) will certainly set up some operation in Argentina. But I could also imagine that some global carriers will operate a tag on instead of parking their planes in Ezeiza for several hours. Already quite a few (e.g., KLM, Air Canada, Qatar) operate international sectors in the region (e.g....
I think you might be wrong about foreign carriers operating domestic flights in Argentina. Firstly, carriers from other countries in the region (e.g., Latam, Avianca, Sky, JetSmart) will certainly set up some operation in Argentina. But I could also imagine that some global carriers will operate a tag on instead of parking their planes in Ezeiza for several hours. Already quite a few (e.g., KLM, Air Canada, Qatar) operate international sectors in the region (e.g. to Chile or Brazil) - so why not to one of the larger cities (e.g. Cordoba) or tourist/cruise ship destinations (e.g. Ushuaia).
Oh wow this is huge.
Is this the first time a country has opened up its skies like this in this manner?
I know there are a few loose examples (EU allowing 49% foreign ownership, Australia allowing 100% foreign ownership if airline is locally managed) but that's about it.
Wow
Brazil has allowed 100% foreign ownership since 2019 and the effect on competition has been precisely zero. It turns out other factors (business and tax environment, exchange rate dynamics, economic growth, etc) are hampering foreign investment in the sector. So I wouldn't hold my breath waiting for dramatic changes in the Argentina aviation landscape.
I think your understanding of the US Open Skies policy is fundamentally wrong. There is no single Open Skies treaty, or even a framework of Open Skies treaties. Each individual "Open Skies" agreement is actually a bilateral treaty between the US and the country involved, and each of them is different - often in smaller subtle ways, but sometimes quite substantially.
Furthermore, signing an Open Skies treaty with the USA does not grant any sort...
I think your understanding of the US Open Skies policy is fundamentally wrong. There is no single Open Skies treaty, or even a framework of Open Skies treaties. Each individual "Open Skies" agreement is actually a bilateral treaty between the US and the country involved, and each of them is different - often in smaller subtle ways, but sometimes quite substantially.
Furthermore, signing an Open Skies treaty with the USA does not grant any sort of actual rights to operate to the USA. The airlines still have to be classified as IASA Category 1 by the FAA, which has become more of a political and less of a safety program over the last 15-20 years. If you look at some of the countries on the Category 1 list and others that are not, this would be very clear.
Finally, US carriers are the biggest violators of Open Skies treaties themselves. In fact, every alliance's anti-trust immunised JV is a volation of Open Skies. The US and EU may grant "immunity" to their carriers, but those JVs include beyond markets in Africa, etc.. which have Open Skies agreements but whose competition law is just ignored, because the US can get away with it.
which has become more of a political and less of a safety program over the last 15-20 years. If you look at some of the countries on the Category 1 list and others that are not, this would be very clear.
THIS!
I'm *still* trying to find someone who can tell me why the US holds Thailand below a Cat1 listing, when seemingly no one else in the world seems to have a problem with Thai aviation security structure.