A week ago, the Argentinian government announced the reestablishment of a system of fare bands for domestic flights. This measure will impact the low-cost airlines, such as Flybondi and JetSMART, but help the state airline, Aerolineas Argentinas. How will the new system affect the Argentinian domestic air market? Let’s investigate further.
The return of the system of fare bands
Through the Decree 879/2021, the Argentinian government approved that, within 180 days, the Ministry of Transportation will be able to determine the maximum rates on domestic flights and will create a system of fare bands.
According to the government, it is the duty of the State “to ensure the adequate provision of public services, to preserve the sustainability not only of the air transport but also of the general transport system.” Likewise, they seek to avoid “ruinous practices” that may temporarily support the consumer but, in the long run, are “contrary to the general interest.”
The Argentinian government will be able to establish caps and minimums for the prices of domestic tickets. This measure existed in the past; however, the government of Mauricio Macri eliminated the system in 2018, allowing the entry of low-cost airlines such as Flybondi, JetSMART, and Norwegian.
Why take this measure?
Argentina had a 62.5% recovery in November of this year, compared to 2019, according to data provided by the civil aviation authorities. The country’s comeback in the domestic market is similar to that of many other nations globally. We wrote about the subject in Simple Flying en Español.
Aerolineas Argentinas currently has 69% of the domestic market, while JetSMART and Flybondi have 15% each. The new measure will likely impact low-cost airlines.
According to the Argentine government,
“We have made an analysis of the balance sheets presented by the airlines, and we concluded that the economic performance of all the companies is negative.”
In other words, the income from the aeronautical activity does not cover its costs. This has been derived from “the setting of predatory rates,” the government assured.
While JetSMART and Flybondi are analyzing the recent announcement, Aerolineas Argentinas is celebrating.
Pablo Ceriani, general director of the state company, said that the measure will put “rationality in the market.” It will also allow airlines to operate in a more financially sustainable environment.
“What it is going to do is preserve the companies’ finances. It will be to the benefit of the industry in general and, obviously, of the low-cost in particular ”, he added.
“These measures make the operation more expensive, lead us to be more inefficient, and level down the whole industry,” he said.
More controversial decisions
The establishment of the fare band is not the only controversial decision the Argentinian government has made in recent weeks.
In November, the government prohibited international tickets and other tourist services from being financed in installments paid with credit cards.
“This recovery is already at risk, given that almost half of the tickets sold by travel agencies are issued through credit cards and, in particular, those financed in installments. In addition, it must be considered that international tickets purchased in Argentina in pesos impose a large tax burden, to which is now added the impossibility of facing the payment in installments,” said Peter Cerdá, IATA’s Regional Vice President for the Americas.
What do you think of these new measures in Argentina? Write your opinion in the comments.