Due to the current coronavirus pandemic, Aerolíneas Argentinas had a 97% decrease in its incomes, as announced by CEO Pablo Ceriani. Additionally, he said that the deficit of the airline had grown a lot during the last few months, and it will continue growing while the demand doesn’t recover. He expects that things will go back to normal in a couple of years. What does it mean for Aerolíneas Argentinas?
The Argentinian Government will have to bail out its airline
The Argentinian Government may have to spend over US$880 million in subsidies in 2020 to keep Aerolíneas afloat. Chilean newspaper Pauta first reported this.
Last year, the Government in Argentina injected US$680 million into the carrier. During 2019, Aerolíneas generated US$1.7 million in income, but it wasn’t enough to break even. Currently, Pablo Ceriani expects that it will take five years before the carrier achieves profitability. He wrote on Twitter,
“During this time, we had a decrease in our income of 97%. We currently don’t have any other financial aid that the one given to us by the National State.”
To cope with this crisis, Aerolíneas has delayed nonessential payments and renegotiated with fuel providers. It is also talking with banks in Brasil and Argentina to reschedule payments and delayed the payment to leasing companies. By the way, the bank in Brasil is the same that is currently in talks of a possible loan to the domestic airlines in that country.
Many airlines will go bust, predicts the CEO
On Twitter, Pablo Ceriani said that many airlines would not be able to survive the current crisis. While this is not breaking news, he expects Aerolíneas Argentinas to survive it. To do it, the carrier and the Government have taken a few other measures over the last days.
For instance, at the beginning of May, the Argentinian Government announced the fusion of its two state airlines: Aerolíneas and Austral.
Last week, Aerolíneas’ management said that 75% of its employees would be furloughed for the next two months. It added that the 7,500 employees affected would receive up to 75% of their wages during this time.
These measures are vital, so the airline doesn’t make permanent employee cuts, said Ceriani. Currently, Aerolíneas has over 12,000 employees. The problem with Aerolíneas Argentinas is that, over the years, it hasn’t been profitable, and one of the main reasons is that it has too many employees. In this regard, it has had a similar problem to the one that ails Alitalia.
How vital is Aerolíneas to Argentina?
South American carriers are having the worst year in their history. While the coronavirus crisis has hit worldwide, Latin America may be the most problematic of all the regions. There are two explanations for this statement: first, Governments have not come to aid the carriers in Latin America. Second, even before the crisis, it was tough to break even in Latin America, and only a few airlines did.
For Argentina, the importance of Aerolíneas Argentinas is evident. According to the Civil Aviation National Administration, last year, Aerolíneas had 63% of the domestic market share. In the second place, it was LATAM Airlines, with 16% of the market share. But, as we know, LATAM Airlines Group is currently in Chapter 11, and the Argentinian branch was left out of the restructuration. What’s the future for LATAM Argentina? No one currently knows. Several low-cost carriers shared the rest of the domestic market in Argentina.
Finally, Argentina is still banning any commercial operation until September. While we don’t know what kind of hit this decision will have on the air industry, we are almost sure that Aerolíneas Argentinas will survive, thanks to the Government. What type of market will it find after the crisis?
What do you think? Let us know in the comments.