Argentina’s Domestic Flight Traffic Won’t Recover Until Mid-2022

(Bloomberg) -- Argentina’s flagship carrier expects domestic operations to reach pre-pandemic levels by July of next year, according to its top executive. 

Aerolineas Argentinas President Pablo Ceriani said flights to tourist destinations within the country, from Patagonia in the south to Iguazu Falls in the northeast, are picking up faster than expected as the country emerges from one of the longest and harshest lockdowns in Latin America. Ceriani said he still sees room to recover on international destinations. 

“We are operating at roughly 20 to 30% of pre-pandemic levels in Europe and Latin America,” Ceriani said in a phone interview from Bogota, where he was attending the Alta Airlines forum. “We will have to see how passengers react to vaccine certificates.”

South America’s second-largest economy adopted strict travel measures during the pandemic, halting nearly all international and domestic flights for months last year. The country removed a daily entry cap of passengers applied earlier this year and foreign tourists will be authorized to enter the country starting in November. 

Argentina doled out about $600 million in subsidies last year to keep its state airline afloat, a practice that precedes the pandemic. Ceriani said that he expects the full-year subsidy for 2021 to be lower than the previous year’s, and declined to provide an estimate for when the carrier plans to break even. 

Argentina’s state-run carrier has depended on subsidies since it was nationalized in 2008, but the gap has been exacerbated by a three-year recession, double-digit inflation and high oil prices. Fuel and plane leases, which are among airlines’ biggest costs, are both paid in hard currency, an additional problem in Argentina, where the peso is among the worst emerging market currencies despite strict capital controls. 

Still, the company isn’t planning to reduce its fleet of 78 passenger aircraft, and Ceriani added that the main challenge for players in the domestic market, including low cost carriers, are “infrastructure restrictions.” 

“There is a lot of demand in the main airports but they are really congested and there’s not much capacity available,” he said. 

Slow Motion

Across Latin America, airlines are expected to post cumulative losses of $5.6 billion this year and $3.7 billion next year, according to the International Air Transport Association, known as IATA. The recovery in Argentina’s domestic market is roughly in line with what airlines are seeing elsewhere, with domestic travel expected to return to pre-pandemic levels next year while international travel lags at around 44%, IATA Director General Willie Walsh said. 

“We’ve just gone through the two worst years in the history of the industry,” Walsh said in an interview. “But the restrictions being removed is making a difference.”

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