A low-cost year in the country: 393 flights a day, who's who in the market and how to take advantage of offers – 02/27/2019

In South America A pioneer was the Volaris, which began operating in Mexico in 2006, and a year after it took off in Colombia EasyFly, followed by VivaColombia. The rapid growth of the market led to the creation of Wingo, of Colombian and Panamanian capital, and other companies emerged, such as Interjet in Mexico, Sky in Chile or Azul and Gol in Brazil. One fact: Mexican Volaris belongs to the Indigo group, owner of Jetsmart, which will soon begin flying in Argentina.

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Is there room for everyone?

But returning to our country, the question that arises is:there is room for so many companies and airplanes? Is there enough market for everyone?

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"Yes, there is room and the market will grow, which is good for Argentines and tourists. There is a lot of room for development, "says Matías Maciel, a spokesman for Norway's Norwegians, a company of Norwegian origin that settled in the country and started flying in October of 2008." It is the first expansion of the Norwegian in South America and we arrived in Argentina for a combination of factors. On the one hand, a process of expansion of the company on a global level, and, on the other, a new stage of dynamizing the aviation sector in Argentina, which has a lot of potential, "explains Maciel.

Also for Lucía Ginzo, Director of Corporate Communication at Flybondi – a company that inaugurated the "low-cost era" on January 26, 2018 – the potential is great: "Argentina was one of the few countries that did not have low- its cabotage market handled very few passengers compared to other Latin American countries. Today there is great potential for development not only because it can grow in number of passengers but also in connectivity. We have come to generate a change in the market because we target the whole segment of people who do not fly, or who do so sporadically"He says.

The forecast coincides with Gonzalo Pérez Corral, general manager of Jetsmart, who will begin flying in April from El Palomar: "Today there is a gigantic opportunity to develop the market in terms of number of passengers and flights," he says. And he points out that in Argentina the percentage of air travelers per capita is still much lower than in the neighboring countries: half that in Brazil and one third than in Chile. "We believe that the market can double in five years and there is an opportunity to develop new routes, "he enthuses.

Also of the traditional companies, Aerolineas Argentinas and Latam, predict that the market will grow. For Máximo Amadeo, commercial director of Aerolíneas, "the repressed demand is still great; there is a great potential that has not been developed and that leaves a lot of growth for the airlines, even with more operators in the market. Airlines, with almost 70% of market share, is responsible for driving this growth. That is why the first thing ahead of 2019 is to continue generating more flight offers, more frequencies and prices according to the new level of demand that begins to appear. "

As much as, from Latam Argentina indicated that "the opening of the aeronautical market responds to a worldwide trend of which Latam Airlines is part of the different countries in which it operates. The Argentine market has enormous potential for development and growth opportunities., which we follow and consider auspicious. "

So things, everything seems to indicate that the market will continue to grow. Although the pace "depends very much on the general economic context, the number of passengers transported increases year after year, but a recession scenario can affect (indeed, affected) this demand." Moreover, the dynamics of the market itself may attract less- or companies with less capital out of circulation. In any market in the world, operators – low cost or not – are guaranteed to survive"Says Pablo Diaz, a specialized journalist, creator of the Diazpez Blog and responsible for the Latin American area of ​​Airlinegeeks.com.

Image exchange

One of the keys to the arrival of the low cost, according to those interviewed by Clarin (All companies were consulted, and only the Andes and Avianca Argentina did not respond), is "changing the image" for air travel, which in Argentina was still associated with something expensive and exclusive. "Many people who do not know or are not encouraged, with low cost is traveling for the first time. In fact, Jestmart already carries 2.5 million passengers a year in Chile, and this is the figure in which the market has grown, "says Pérez Corral. In other words, there was not so much" passenger "passing between companies, but one growth of the global market, with many travelers more than in recent years.

And a similar phenomenon is taking place in Argentina, because from 2015 to today, the number of daily flights has increased significantlyand both of Flybondi and Norwegian, highlighted the number of passengers who flew "for the first time" in these companies. The numbers of the National Civil Aviation Administration (ANAC) are eloquent: in all of 2015 there were 118,956 commercial flights in Argentina, regular and unscheduled, equivalent to an average of 325 per day. In 2018, the number of flights rose 20.5% to 143,327, bringing the daily average to nearly 393. And despite this much larger number of flights, the aircraft occupancy rate has increased: from 75% in 2015 to 81% in 2018.

A trend that continues this year: in January 2019, there were 13,262 flights, against 11,645 in the same month of 2018: Increase of 13.8% in the interannual comparison. Conclusion: There are many more people traveling by plane in Argentina.

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And this increase in the number of flights and passengers, both from Buenos Aires and between cities in the interior, multiplied the operations of many airports in the country. Between 2015 and 2019, for example, Córdoba airport grew by 118% in passenger traffic; Mendoza, 103%; Iguazú, 192%; Rosário, 179%; Santiago del Estero, 264%; Catamarca, 229%; Mar del Plata 137%; Santa Rosa 155%; and Posadas, 123%. Aeroparque and Ezeiza had more modest growths: 25% and 36%, respectively; although Buenos Aires has added El Palomar, for which 86,000 passengers only passed in January 2019.

However, this last January the "star" airport of the country was Corrientes, where the number of passengers almost doubled: it grew 87% in relation to January 2018. Mendoza (37%), Santiago del Estero (34%), Iguazú (30%) and Posadas (27%) followed.

A little bit of everything

An interesting fact among the new companies operating in Argentina is its variety. Starting with that some operate in Aeroparque -Noruega and Avianca- and others of El Palomar -Flybondi and Jetsmart-. But also They have different profiles and differentiation strategies, important to a confused traveler who might think "they are all the same."

"We operate from Aeroparque and we stand out for offering free wifi on boardbecause we target different segments of passengers and put a lot of focus on the corporate sector, "explains Matías Maciel, and explains that the Norwegian is not defined as a" low cost "company, but rather as a" low rate ", associated with an excellent service.

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Jetsmart, in turn, is a company that was born as "ultra low cost"What does this imply? the planes are already "factory set" especially for a low cost. Thus, Airbus A320 NEO "0 km" seats with which the company will operate do not recline – they already come reclined above normal – do not have screens, USB or Wi-Fi outlets and, gaining space, normally occupy ovens or food storage , they have two bathrooms in the back.

Lucía Ginzo defines Flybondi as "the ultra low cost of Argentina, which can offer the lowest rates, a pioneer in opening and developing this new market, to which the others arrived almost a year later." And he says that one essential difference is efficiency: "In order to offer our tariffs, it is essential that our processes are efficient, profitable and successful, applying the five basic principles of a very low cost: single fleet (Boeing 737-800 NG), high daily use of each aircraft, optimization of time scales, maximum capacity of seats in each aircraft (189 in each airplane) and segmentation of products and services. In city Flybondi We do not charge for anything that is not usedEach passenger decides to pay only for what they want and thus defines their travel experience. "

The "big" is not far behind

The arrival of new companies kicked the board of a market accustomed to tranquility, and the two leading companies, Aerolineas Argentinas e Latam, they did not stay to watch from outside, but they reacted quickly to the new reality by flexibilizing its conditions, highlighting its competitive advantages – greater connectivity and more complete fleets – and adopting some of the typical low cost strategies: basically, offering a minimum rate that includes "transfer only", Say it somehow , charging as "extras" services, such as the release of luggage, board food or seat selection.

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"Airlines is not and will not be a low cost companyThat's why it does not seek to combine them, "says Máximo Amadeo, commercial director of the airline, which launched the new scheme of" personalized rates, "which offers greater flexibility to customers." This change in the way you sell tickets , Aerolíneas Argentinas customers pay exclusively for services that meet their needsand access to a greater variety of options at the time of purchase, "explains Amadeo.

In addition to seeking alternatives to compete, Aerolíneas maintains a essential difference: a fleet of 70 aircraft -15 times greater than the lowest cost – with an average of 270 flights and 30,000 passengers transported every day. Its connectivity -127 internal routes and the fact that it is the The only company that reaches all the provinces of the country at least once a day– also clearly distinguishes it from its competitors.

And, interestingly, a resolution implemented in 2018 that seemed tailor made for low cost, as tariff deregulation, has also benefited traditional operators. Aerolíneas, for example, launched promotions that led it to sell 393,000 tickets in just one week, surpassing previous estimates. And so, despite increased competition, ended 2018 with a record number of passengers transported on domestic flights: 9.8 million.

Also in Latam they supported the elimination of tariff bands because, they point out, the measure allowed the company to apply a sales model in the country that it had been implementing in the rest of its subsidiaries.

"We were able to offer the passenger, through four fare categories (promo, light, plus and top), the possibility of choosing how you want to fly, paying only for the services you need (among 6 associated products or services: return ticket, date modification, mileage accumulation, 23-kilo baggage waiting, seat selection, seat preference) and selection of the fare that best suits your needs ", explain Latam

In this context, between low cost and airlines with new tariff schemes, which should be taken into account when buying an air ticket:

• 1. When they have the possibility, they operate in secondary airports, which charge lower rates. In our case, it's El Palomar, which uses Flybondi and JetSmart. However Norwegian operates from Aeroparque.

• 2. In case of low cost, tickets are purchased via web: There are no customer service or call center offices, as do traditional companies.

• 3. The basic rate includes only a small hand baggage and in many cases hand luggage is not included. To pay for the luggage, you have to pay more, and it is important to know that paying for the luggage at the time of check-in or at the airport is usually more expensive. If you know in advance what you will need, you should purchase the rate it includes.

• 4. Not allowed choose seat, they are assigned randomly. If someone wants to choose the place, he should pay more.

• 5. Low cost usually has more seats per plane, so there is less legroom (or use lighter seats, which take up less space). In many cases (not all), seats do not recline (or do very little) to gain space.

• 6. The food on board It is not included, but can be purchased on the plane.

• 7. At low cost there is no entertainment on board with exceptions. Norwegian, for example, offers free Wi-Fi.

• 8. "Time is money", then, in general, low-cost airplanes always try to get off very punctual. The rise and fall of passengers are often faster than in traditional companies.

• 9. You have to do the check in online and take your boarding pass printed or downloaded on your mobile phone. Otherwise, in most cases low cost will have to pay at the airport, and usually not cheap.

• 10. Cheaper rates and general promotional rates do not allow changes or refunds. Or they allow it, but with high costs. This is an important item to consider, especially in advance purchases.

War rate

With the elimination of tariff bands the "war" of tariffs began; In November, Norwegian launched a "black weekend" with a 30% discount on its six domestic destinations and shortly thereafter, Flybondi kicked the wasp nest by issuing tickets with one peso plus per flight. Jetsmart was not far behind, and it also posted a stock of 5,000 tickets for a final weight per stretch, with the slogan "the rates are paid by us," and managed to sell no less than 54,734 tickets in 24 hours.

How long can this "war" continue without the victims starting? "I think it will continue, what can change is the dynamics of each battle and rivals: not all companies can sustain the" war "in the long run. The one with the best cost structure will have better margins to set prices and set the pace. The rest will follow, as far as wise, or fly at a loss while it lasts, "predicts Pablo Diaz. And it gives the example of the Indian company Jet Airways, a traditional carrier that entered into a tariff war against low-cost companies selling tickets to 2 cents of rupiah. "He entered the race, but without the flexibility to reduce costs, today he is in serious risk of bankruptcy".

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In Argentine, the first shots were not long in coming: Andes Líneas Aéreas reduced routes and frequencies and returned two rented Boeing planes, while Avianca Argentina announced that it would cancel the flight between Mendoza and Lima and initiated the Crisis Prevention Procedure to the Ministry of Production and Labor.

The situation at Avianca was evident at the end of 2018 when he backed off with the international flights he had announced and returned an Airbus A320 with which he was flying between Buenos Aires and San Pablo. The company, according to the news portal Aviation News, blame the devaluation and increase of fuel. "The crisis procedure is for the state to help us for six months. We want to share the effort," company CEO Carlos Colunga was quoted by Aviation News as saying.

What will come

In this way, things look like the "low cost era" just startedand we will continue to see and experience changes in the air market in both new and traditional businesses.

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"In 2019, we will continue with our expansion plans in the country and in the region, consolidating us as the first low-cost airline in Argentina, "says Lucía Ginzo of Flybondi." We started in 2019 with two great news for a new airline; its first year of operation and its first million passengers transported. And in the first semester we will start operating 7 new routes which will give greater connectivity to Rosario, Cordoba, Salta, Tucumán, Iguazú, Neuquén, Trelew and Mendoza. We will continue to strengthen our route to Paraguay, which is working very well, and we will add Brazil as a destination. In addition, we prepared with a very good offer of routes and frequencies for the winter holidays and we continue to evaluate the aircraft market with the objective of making new additions to our fleet from the second half of the year. "

Over the next five years, the company expects to double the commercial market and transport more than 10 million passengers. "Our commitment to the country is long term, and that is why, within this plan, we expect to generate 2,000 new direct jobs and 25,000 indirect jobs," says Ginzo.

Norwegian, meanwhile, plans increase its routes, which are currently six, and add new aircraft to reach a fleet of 8 to 12 by the end of the year. "Until today we have fulfilled the planned thing, last January we positioned ourselves as the third operator in the country in number of cabotage flights, and in the folder of figures we incorporated more aircraft, we increased frequencies and we added new routes between several destinations that we found interesting, like Jujuy, Tucumán, San Juan and other Southerners, as well as regional destinations in South America. We also plan to start flights connecting inland cities without going through Buenos Aires, "says Matías Maciel.

What about Jetsmart? It has not yet taken off, but already plans to grow from its initial three aircraft to five by the end of the year when it plans to have 12 operational routes. "We see opportunities to develop new routes, which we have not yet launched, but we will do so soon. We are part of a financially supported group with new planes, a very simple model: ultra low cost and a super transparent proposal for the passenger. the pillars of our competitive advantage, "says Gonzalo Pérez Corral, who remembers that soon Aeroparque will become an airport exclusively for cabotage, and all regional flights will be transferred to Ezeiza. So advance, El Palomar will appear as more convenient because of its proximity to the city center.

Also, Aerolineas Argentinas implements projects for the year. For example, establish a "Aerial Bridge" between Buenos Aires and Cordoba oriented to the business segment of passengers, who demand greater flexibility. Thus, the person traveling at this rate can change their flight without paying any additional, just anticipating their decision before they check in. "We are also working develop the high-value customer segment, about 240 thousand frequent passengers, who buy tickets for more than 100 thousand pesos per year, "says the commercial director. Analyzing and Optimizing the Network, both on routes and at times, with the aim of becoming more competitive each day, and will advance implementation of a door-to-door delivery system in 24 hours, with which he hopes to "triple the earnings of wineries," reaching $ 24 million annually in the next three years.

Latam will continue to count on one of its great forces, which is to offer the greater international connectivity of the interior of the country, through its main connection centers: San Pablo (Brazil), Santiago de Chile and Lima (Peru). And it will continue to work on operational efficiency to maintain historic standards of quality in terms of punctuality, regularity and passenger service; encouraging connectivity and accessibility to the airplane. "In relation to the industry, we have the challenge, along with the rest of the players that compose it, to achieve a reduction of costs", emphasize the company.

Who is who among the low Argentine cost

Jetsmart: is a company owned by Indigo Partners LLC, a private investment fund based in Phoenix, Arizona, which comprises the largest group of low-cost airlines: Frontier Airlines (USA), Wizz Air (Hungary), Volaris (Mexico) ) and JetSmart (Chile and Argentina).

Norwegian Air Argentina: Founded on January 25, 2017, it is a subsidiary of Norwegian Air Shuttle, which is part of the Norwegian Group, together with Norwegian Air International and Norwegian Air UK.

Flybondi: is an Argentinean company whose main investors are Cartesian Capital Group LLC, Yamasa Co. Limited. Former executives Michael Cawley (Ryanair) and Michael Powell (Wizz Air) are also shareholders.

* Avianca Argentina and Andes Líneas Aereas are not defined as low cost airlines.

What does it mean that an airline is low cost?

Certainly many people still do not have very clear what defines an airline as low cost. That is why we can do the following summary: Let's start by saying that the goal of a low-cost airline is to operate reducing their operating costs to the maximum possible to be able to offer economic passages. Thus, low-cost airlines typically offer cheaper fares than traditional airlines in exchange for eliminate, or charge additionally, many of the services that these companies do include.

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En principio, el término era empleado en la industria de la aviación para referirse a compañías con costos de operación menores que los de la competencia, pero luego su significado varió, y ahora define a cualquier aerolínea de precios bajos y servicios limitados, frente a los de las compañías tradicionales. Una de las claves de estas aerolíneas es utilizar un mismo modelo de avión en toda su flota, con el objetivo de reducir costos de mantenimiento.