Merging company

Government spends three times more on Aerolineas Argentinas than on border protection

In 1950, under the government of Juan Domingo Perón, it was created Argentine airlines. Seven years later he was born Southern competition in the domestic sphere, and they eventually merged in 1972. Due to the increase in public resources required to fill the deficit, the company was privatized in 1990. However, under private management, performance did not improve. not and, faced with a terminal situation Both the ruling party and the opposition decided to renationalize in 2008.

Various arguments have been used to defend the “flag line” as a commercial air monopoly. In some cases, they resort to patriotism, in others to the importance of the airline to cover unprofitable routes, or even to the defensive reasoning that all airlines operate at a loss.

The truth is that with the opening of the market from 2015, Argentines gave up their patriotism at the more competitive prices of the lines at low price, to lose Aerolineas Argentinas 17 market share points, while between 2015 and 2019 domestic cabotage routes increased by 55% and global net tax profitability of airlines remained positive at around 4%.

Now the national government has decided by decree to reapply tariff bands on scheduled domestic flights for commercial air transport. This measure, which remained in force until 2016 and was abolished by Mauricio Macri, benefits the national airline and harms low-cost companies.

“Despite the above data, Argentina insists on returning to a market similar to that of 2008-2015, when the company was just nationalized, while the global trend is in the direction of intelligent regulation with effective supervision of private operators. The Argentinian model consists of maintaining increasingly large deficits thanks to subsidies in order to gain market share and minimize the level of competition, ”explains IDESA.

These rules of the game – adds the consulting firm – lead to unusual resource allocations where Aerolineas Argentinas’ budget deficit in 2021 is almost three times the amount allocated to the gendarmerie to patrol and protect the border. “The perverse mechanics of managing an inflexible cost structure knowing that taxpayers will come to the rescue also materialize in productivity metrics such as the ratio of employees per plane. In the case of Aerolineas Argentinas, it is the highest of the 25 most important regional and international airlines.“, they slip.

Finally, they indicate that the “flag line” argument would only be valid if it could be demonstrated that aeronautical services cannot be provided by private initiative. “State efforts, as is the case in much of international experience, must focus on guarantee market transparency, provide adequate infrastructure and ensure security “, they hold.

“The existence of a public airline should not be contingent on the presence of state subsidies, but on the decision of the users. As long as this is not respected, travel to the middle class will continue to be subsidized at the same time as 6 out of 10 children are poor “, they conclude.

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