Argentina’s national carrier (IATA: AR) has been state-owned for 16 years. During that time, various governments have pumped a lot of money into the company to keep it airborne. They did that because AR is more than just an airline: it is a symbol for the country. However, it is one that has been run down and has degenerated into a self-service store for a certain privileged clientele. Next week, the ultra-liberal President, Javier Milei intends to present a roadmap for the airline’s privatization. The prospects for its realization are good.
Aerolíneas Argentinas, incepted in 1950, has plenty of experience with changing ownership. The formerly state-owned national carrier was privatized in 1989, and run by Iberia, then Spanish capital investor Sociedad Estatal de Participaciones Industriales (SEPI), American Airlines, followed by Spanish Grupo Marsans. Deprived of cash, Marsans sold Aerolíneas Argentinas back to the Argentinian State in 2008. Since then, the carrier’s losses have been piling up.
Tough restructuring concept is needed
There are many reasons for AR’s downhill drive: mismanagement, a bloated personnel structure, continued walkouts of the workforce coupled with growing competition from budget airlines on domestic and regional routes, but also increasing pressure from the LATAM Group, which dominates South America’s passenger and cargo markets. Added to this is the unfavorable geographical location on the southern part of the American continent. This makes a Buenos Aires-based transnational hub-and-spoke system unattractive when it comes to enabling passengers to commute quickly and the rapid cross-border transits of cargo shipments to Uruguay, Chile, Paraguay or to destinations in the Argentinian hinterlands. Hence, AR’s international network is dominated by point-to-point services.
1200 pilots for 80 aircraft
According to presidential spokesman, Manuel Adorni, the Argentinian State has shuffled 8 billion USD into the airline since 2008 (about 7.2 billion euros), to cover the company’s losses which he describes as an ‘atrocity’ and ‘lack of empathy’ towards the citizens, many of whom “have never flown in their lives.”
“This atrocity is also reflected in the [carrier’s] oversized structure, which has a headcount of 1204 pilots to fly only 81 aircraft in service; an absolutely excessive number compared to the industry average,” said Adorni.
Meanwhile, a group of 20 deputies, headed by Hernán Lombardi, submitted a bill to the Congreso de la Nación Argentina (National Congress), supporting the privatization of AR. In their note, they point out that “in recent years, traveling with the flag carrier has become a privilege reserved for a few and financed by those who barely manage to cover their basic needs. For many who try to access this service, the high cost of tickets, added to the scarce supply of air routes, has represented a significant obstacle.”
Commercial efficiency is a foreign word for AR
Lombardi’s bill also points out that AR has never been able to match the low fares offered by budget airlines, which has contributed to its growing lack of competitiveness in the market. “Years of corruption, the use of the company as a niche to accommodate party militancy, and extortion by some unions, have cost millions of dollars to all Argentines,” claims Lombardi.
“Privatization will allow Aerolíneas Argentinas to operate under criteria of commercial efficiency, improving the quality of service and generating a more competitive environment that will benefit all citizens,” Mr. Lombardi concludes.
Postal Service is next on Milei’s list for radical budget savings
Alongside the postal service, Correo Oficial de la República Argentina, the airline is the largest state-run company in the Latin American country. In addition to AR, the 53-year-old anarcho-capitalist, Milei, whose symbol is the chainsaw, has also announced a radical austerity course for the postal service to drive state costs down. His government plans to shut down a large number of postal stations, especially those in rural areas with only offices in populated centers to be spared. For many inhabitants of the hinterlands, this means long journeys to pick up or drop off letters or parcels, and to have their monthly pension payments handed out, which often are processed via the postal system. In Buenos Aires, economic and policy experts are debating how long Milton Friedman fan, Milei will be able to sustain this radical strategy of shrinking state services. The most common forecasts by polling institutes are until the end of the current summer in South America or latest by mid-2025.
