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Topic: The 10 Reasons Aerolineas Argentinas Is Failing
Username: sciurusmdg
Posted 2013-04-27 15:51:42 and read 10712 times.

An article came out today from an interesting news source in Argentina called InfoBAE. The website is not particularly biased against or for the government.

http://www.infobae.com/notas/707975-...tion-de-Aerolineas-Argentinas.html

In short it lists the following 10 reasons why AR is failing.

This is a rough translation of what the article said, with a few bits changed to make sense to foreign readers and some (but not many) personal views/examples put in to help illustrate certain points.

What does everyone think?

1. Old and Discontinued Aircraft

They announced the arrival of the A340 the same day that Airbus announced it was to stop making them. In the press releases they said they were renting them "new", when in fact they had (average) 17.2 years.

2. Disused aircraft for which rent is paid

There is a Boeing 747 that is suposed to go to Angola, however AR is continuing to pay the lease until 2014. It hasnt been used for over a year now. There are also a lot of aircraft (MD88s et) that are not used but are parked at various airports incurring fees of several million dollars per year.

3. Aircraft with low capacity and high operating cost

They lose money on International routes because of a high operating cost. To make a profit on the flight to Madrid, the Airbus A340 should have 320 seats occupied, but it only has 280.

4. A heterogeneous fleet

They have three different types of aircraft. To have this with an airline of less than 100 aircraft is a hangman's noose. The government argues that it's a lie that the fleet is not unified, because Austral has Embraer and AR has Boeing and Airbus. However, AR and Austral are both government run, and the bill to the nation is the same. Three different types, means triple maintenance costs, training of mechanics and pilots, etc..

5. Purchasing Embraer 190 aircraft

Austral bought nearly 30 Embraer 190s and these are no good for Argentina, a country of huge distances, with 5000 kilometers from one end to the other (a 6 hour flight). The Embraer is a great aircraft for flights of under 2 hours, but those are just not the distances of Argentina.

6. AR and Austral operate separately

All Latin American companies are merging. TAM and LAN formed Latam, Avianca merged with Taca and Copa Airlines and they have seen solid results. Here, in one country we have two airlines, both state owned and with lots more things in common: AR and Austral. But they do not fuse together: there are two managements, operations, maintenance and crews.

7. They are not attractive airlines to premium passengers

Airlines are fighting for the big business traveler, the guy who does not mind the cost of the ticket and just wants to pay to reach the destination on day and time he needs. whenever an aircraft has occupied has sold the seats in first and business for an inflated cost, these saving can be passed on tho those traveling in economy class. But AR has virtually no premium passengers. Also, problems with Aircraft being on time and reliable.

Every AR flight to miami loses $ 50,000 . American Airlines has 7 flights weekly, with passage of $ 7,000, but it offers a real bed, and this sucked all business class passengers away from AR

8. No cargo is carried

LAN and American Airlines take all of Argentina's cargo because AR refuses to take cargo, a necessity in the modern world.

9. The price of domestic flights is high in relative terms

Routes such as Catamarca, Esquel, Santa Rosa, are of low density and do not generate profit because of the lack of people flying, however if you compare the cost of travel, the Catamarcans pay more than any others.

There is not a pricing policy that helps to the domestic market... Miami to Buenos Aires is the same price as Catamarca to Ushuaia .

10. No flights to strategic destinations

For example there is an AA flight that is high loss due to lack of people: Sydney (Australia) - Auckland (New Zealand) - Buenos Aires. Passengers could then wait here and fly onwards to destinations in Europe, if AR offered them. It would be the same flight time, and could be offered at a much reduced cost.

Also, when it comes to international routes, AR must seek foreign Argentine colonies. Where are they? In San Francisco, California for example- however all those Argentineans come by other airlines. Besides, for business where do you want to travel ? The center of world commerce, New York, but AR does not go.

edited for spelling

[Edited 2013-04-27 16:05:14]

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: trent772
Posted 2013-04-27 18:56:23 and read 10294 times.

Here is what I think:

1. Disagree, lots of airlines make a profit with not so new aircraft, AA has made a profit flying a bunch of old MD80's, and as for the A340-300's, there's also a bunch of airlines that fly them while still turning a profit, for example: AF, LH, TK, VS, CX, LX, EK to name a few

2. Agreed, those costs must be cut, no excuses there.

3. Disagree, I think one of the main problems with AR is their cost structure, how do other airlines (BA, AF, LH, AZ) with long range flights into EZE make it work?

4. Disagree, three types of airplanes aren't that many, I actually think the fleet is well distributed, A340 for long range, B73G/738 for mid-short range and E190 (on behalf of AU) for short range.

5. Agree/Disagree, not knowing the route structure in Argentina I'm going to guess here, looking at a map of Argentina I find that Buenos Aires is a little north of the middle of the country, guessing that most of the E190 flights originate from AEP then not many flights would be of 5000kms, also if AR bases a few of these airplanes in Mendoza and a few others in another city like Resistencia or Tucuman then the north of the country would be covered, the same could be applied to the south, something like Ushuaia or Rio Gallegos.
Again I do not know the route structure in Argentina or the population/political importance of the cities I mentioned so I'm just guessing.

6. Agreed, these two should be merged into one, no excuses there but AR being Government owned this has never constituted a problem.
By the way, AV and TA merged but CM was not a part of the deal.

7. Agreed, AR needs to do something about the quality of its product, something drastic needs to be done.
It is mind boggling that every MIA flight is loosing 50K.

8. Agreed, cargo needs to carried, the bellies of the airplanes need to be put to good use, there is no reason not to, especially in this day and age.

9. Agreed, but AR having the privilege of a monopoly and the Government to back it up, they can charge what they want.
This needs to be changed.

10. Agreed, again that's what happens when you enjoy a monopoly, you can do anything you like.

I personally think AR needs a total make over, I have a few friends that fly for AR and I know they have a very strong union and that is never good, that also needs to change, but the fact that Mrs. K continues allowing AR to post awful number and does nothing to stop it just because it is the pride of the country is just crazy.

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: yellowtail
Posted 2013-04-27 19:01:37 and read 10276 times.

there are only 10 reasons?

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: Byrdluvs747
Posted 2013-04-28 01:38:24 and read 9836 times.

Now that AR is a Skyteam member and partner of DL, this is music to my ears.

Quoting sciurusmdg (Thread starter):
Every AR flight to miami loses $ 50,000 . American Airlines has 7 flights weekly, with passage of $ 7,000, but it offers a real bed, and this sucked all business class passengers away from AR

The AA timetable shows 2x daily in addition to LAN's daily flight. With MIA being a OW hub, AR will always find it difficult to operate this route

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: dougbr2006
Posted 2013-04-28 05:20:37 and read 8515 times.

Quoting sciurusmdg (Thread starter):
5. Purchasing Embraer 190 aircraft

Austral bought nearly 30 Embraer 190s and these are no good for Argentina, a country of huge distances, with 5000 kilometers from one end to the other (a 6 hour flight). The Embraer is a great aircraft for flights of under 2 hours, but those are just not the distances of Argentina.

If this is true why have they recently topped up their order for another two aircraft on the 7 April 2013 !

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: jfk777
Posted 2013-04-28 06:58:16 and read 7640 times.

Quoting sciurusmdg (Thread starter):
8. No cargo is carried

How can AR not carry Cargo ? Every long haul airline carries cargo, its part of the product mix. With the exception of Australia AR's long haul flights to Miami and Madrid are well within the range of A340-300 and should have no weight restriction carrying freight. AR can alwasy contract Atlas for its freighter(s), but then the unions would probably have a problem if the pilots are not Argentine.

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: sciurusmdg
Posted 2013-04-28 07:45:30 and read 7179 times.

Should of also added that the Argentine government is being accused, and Embraer is being investigated for bribery.

Austral allegedly overpaid U$ 5-6 million dollars on each of the 20 aircraft that were delivered to Austral (adding up to over $100-120 million)

"Magistrate Sergio Torres opened an investigation on suspicion that the Argentine government had paid 5 to 6 million dollars in excess for each aircraft, which would add up to 100/120 million dollars. Aerolineas Argentinas and the government rejected the claims arguing that in effect the original price was 30.6 million for each unit and the additional 4.3 million was the result of spares and pilots’ instructions.

The situation set off alarm bells in the aircraft industry and a warning from United States SEC office to which the Brazilian government responded by opening an internal investigation."

An E-190 was sold to Aeroméxico for 29 million dollars and in July 2009, TACA airlines paid 30.5 million dollars for an E-195. Air Europa in 2009 paid 31 million dollars, also confirmed by the Airline Fleet Management magazine. Finally Ascend Aviation Insight said that in 2009, the E-190 had a going price of 27.85 million"


http://en.mercopress.com/2013/04/23/...neas-argentinas-fearing-surcharges

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: CamiloA380
Posted 2013-04-28 08:58:16 and read 6482 times.

Quoting trent772 (Reply 1):
4. Disagree, three types of airplanes aren't that many, I actually think the fleet is well distributed, A340 for long range, B73G/738 for mid-short range and E190 (on behalf of AU) for short range.

That's true. However I think they mean that it is not when it comes to maintenance since for instance the 737 were acquired from different airlines. So the engines are not the same (versions ranging from CFM56-7B18 to -7B27 I think) which means increased costs in maintenance, crew training, etc, in that aspect. Planes have different configurations, significantly different MTOW, MZFW...affecting performance.

Quoting trent772 (Reply 1):
5. Agree/Disagree, not knowing the route structure in Argentina I'm going to guess here, looking at a map of Argentina I find that Buenos Aires is a little north of the middle of the country, guessing that most of the E190 flights originate from AEP then not many flights would be of 5000kms, also if AR bases a few of these airplanes in Mendoza and a few others in another city like Resistencia or Tucuman then the north of the country would be covered, the same could be applied to the south, something like Ushuaia or Rio Gallegos.
Again I do not know the route structure in Argentina or the population/political importance of the cities I mentioned so I'm just guessing.

It would be better to fly a 737 instead since it would allow them cargo. It looks like it's kind of like the same mistake Pluna did, dumping the cargo business.

I always like to hear Enrique Piñeyro's points of views. He's a very respected guy, I'd like to meet him one day.

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: VCy
Posted 2013-04-28 10:03:10 and read 5934 times.

Quoting Byrdluvs747 (Reply 3):
The AA timetable shows 2x daily in addition to LAN's daily flight. With MIA being a OW hub, AR will always find it difficult to operate this route

As far as their US operations are concerned, why not fly to JFK and connect passengers via Delta, a fellow Sky Team member? Or even MEX to avoid the detour to the southern part of the country and connect them with Aeromexico.

Nonetheless, most airlines flying the same routes as AR have an advantage which is better reputation and better on board product. If i was to go on a long haul flight to EZE, the only reason why I would consider flying with them is because i like using carriers that I know i will not have the chance to use them again because usually travelling from Europe to EZE is a once in a life time experience. Usually  

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: motorhussy
Posted 2013-04-28 11:55:36 and read 5114 times.

If only the problems were so simple then they could be relatively easily addressed. In none of the 10 reasons ascribed is any mention of people or reliability or service or stakeholder/government intervention.

AR has so many natural advantages in Argentina that it just squanders. I'd love to see the airline succeed but I believe that in order to do so, it needs some tough love from its parents (the Govt.)

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: incitatus
Posted 2013-04-28 12:01:13 and read 5057 times.

There is just one word why AR is failing: Cristina.

Argentina is being destroyed by terrible government.

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: PlymSpotter
Posted 2013-04-28 12:13:41 and read 4952 times.

Quoting sciurusmdg (Thread starter):
1. Old and Discontinued Aircraft

They announced the arrival of the A340 the same day that Airbus announced it was to stop making them. In the press releases they said they were renting them "new", when in fact they had (average) 17.2 years.

Presumably you mean just the -300s, the -200s have been in the fleet for much longer. Age though isn't a problem, the lease rates should be cheap and with the right management they are a very effective long haul aircraft to turn a profit with, especially when you need four engines on some of your routes.

Quoting sciurusmdg (Thread starter):
2. Disused aircraft for which rent is paid

That is not uncommon, it may be cheaper to park it and still pay the rent than fly it and make greater losses. Still, it's evidence of mismanagement to have gotten into such a poor situation.

Quoting sciurusmdg (Thread starter):
3. Aircraft with low capacity and high operating cost

They lose money on International routes because of a high operating cost. To make a profit on the flight to Madrid, the Airbus A340 should have 320 seats occupied, but it only has 280.

The operating costs of an airline is much, much more than just the cost of operating an aircraft. If you need to sell 320 tickets on an aircraft which carries 280 just to break even then it is not your aircraft which is at fault or the configuration, it's your revenue management and general costs. Guess what that comes down to - bad management again.

Quoting sciurusmdg (Thread starter):
4. A heterogeneous fleet

They have three different types of aircraft. To have this with an airline of less than 100 aircraft is a hangman's noose.

That's incorrect, they actually have a very capable fleet which could and should be operating very profitably.

Quoting sciurusmdg (Thread starter):
5. Purchasing Embraer 190 aircraft

Austral bought nearly 30 Embraer 190s and these are no good for Argentina, a country of huge distances, with 5000 kilometers from one end to the other (a 6 hour flight). The Embraer is a great aircraft for flights of under 2 hours, but those are just not the distances of Argentina.

Argentina is nowhere near that long, more like a bit over 3,500km from North to South. Aircraft suitability depends on many things, there is no set hand over point between one type and the other, it depends on costs and configuration among other things. Any anyway, if it's a great aircraft for flights of under two hours then it's a great aircraft for most of their routes.

Quoting sciurusmdg (Thread starter):
6. AR and Austral operate separately

The majority of major carriers have a subsiduary operating flights for them. The majority of these don't have a problem, because the problem isn't the idea but the management of the operations in AR/Austral's case.

Quoting sciurusmdg (Thread starter):
7. They are not attractive airlines to premium passengers

Airlines are fighting for the big business traveler, the guy who does not mind the cost of the ticket and just wants to pay to reach the destination on day and time he needs. whenever an aircraft has occupied has sold the seats in first and business for an inflated cost, these saving can be passed on tho those traveling in economy class. But AR has virtually no premium passengers. Also, problems with Aircraft being on time and reliable.


There you have cause and affect. Poor service and reliability equals an exodus of those who can. That's very hard to reverse, they need to revolutionise the product they offer and at least match the reliability of their competitors.

Quoting sciurusmdg (Thread starter):
8. No cargo is carried

If true that is ridiculous.

Quoting sciurusmdg (Thread starter):
9. The price of domestic flights is high in relative terms

Routes such as Catamarca, Esquel, Santa Rosa, are of low density and do not generate profit because of the lack of people flying, however if you compare the cost of travel, the Catamarcans pay more than any others.

If there is genuinely no business case axe them and let LADE serve these destinations. But I suspect they could all be made profitable by a competent management team.

Quoting sciurusmdg (Thread starter):
10. No flights to strategic destinations

For example there is an AA flight that is high loss due to lack of people: Sydney (Australia) - Auckland (New Zealand) - Buenos Aires. Passengers could then wait here and fly onwards to destinations in Europe, if AR offered them. It would be the same flight time, and could be offered at a much reduced cost.

Offering discounted tickets to low yielding economy passengers is only going to lose you even more money. Take AKL-LHR, it is 1365 miles longer to route via EZE than via LAX, and that's the most favorable comparison I could find - AR would not be able to beat other options on cost whilst making any money. They already serve a number of strategic destinations, they need to focus on getting them into profitability.

Quoting sciurusmdg (Thread starter):
Also, when it comes to international routes, AR must seek foreign Argentine colonies. Where are they? In San Francisco, California for example- however all those Argentineans come by other airlines. Besides, for business where do you want to travel ? The center of world commerce, New York, but AR does not go.

No, definitely not. They must first seek profitability in their current core markets before attempting risky expansion like that into highly competitive markets. Otherwise they will just continue to lose even more money.

Quoting sciurusmdg (Thread starter):
What does everyone think?

AR is a ridiculous excuse of an airline. With the kind of state protection enjoyed AR should be rolling in money, but instead they use this protection to shield an archaic and chaotic operation from regular market forces so they can continue to live in a world of back-handers and mis-management. AR could be a fantastic airline, but until they are given a thorough shaking up from top to bottom which cuts out all state intervention they will continue to cost the Argentine taxpayer hundreds of millions each year. It's a sad state of affairs.


Dan  

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: motorhussy
Posted 2013-04-28 12:18:54 and read 4889 times.

Quoting incitatus (Reply 10):
There is just one word why AR is failing: Cristina.

AR was on life support well before the de Kirchner government came to power. Yes, her Govt. is terrible for the airline's success in a natural competitive environment but no less or more so than with previous regimes.

The airline's cost structure is way out of whack compared to that of any modern (surviving) legacy or flag carrier and they need to drastically reduce this but can't do so as it does not fit with the socialist ideology of the Govt.

I think the de Kirchner regime should use NZ as a business model, where the Govt. is the main stakeholder but it is run as a private entity with a set amount of public shares able to be market traded. A Left Wing New Zealand Govt. set up this structure.

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: ATLTPA
Posted 2013-04-28 13:43:44 and read 4233 times.

The graphic in the newspaper article states, "No transportan carga," but is this right?

The last time I flew AR (which was about 3 years ago), I did see some cargo being handled on its planes. I am kind of puzzled that the article says that no cargo is being carried by the airline.

Is AR's website incorrect? It shows them still handling cargo: http://www.aerolineas.com.ar/arg/mai...idSitio=AR&idPagina=87&idIdioma=en

In addition, there was Aerolineas subsidiary JetPaq which handled (and presumably still does handle) packages: http://www.aerolineas.com.ar/arg/mai...idSitio=AR&idPagina=81&idIdioma=en Or is this no longer the case?

Could someone in the know please elaborate on this?

ATLTPA

[Edited 2013-04-28 13:46:09]

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: TheRedBaron
Posted 2013-04-28 14:08:04 and read 3933 times.

Quoting incitatus (Reply 10):
Argentina is being destroyed by terrible government.

for like.... the fourth time....

I am amazed how this Airline is run...

TRB

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: C010T3
Posted 2013-04-28 15:02:47 and read 3473 times.

Quoting sciurusmdg (Thread starter):
5. Purchasing Embraer 190 aircraft

Austral bought nearly 30 Embraer 190s and these are no good for Argentina, a country of huge distances, with 5000 kilometers from one end to the other (a 6 hour flight). The Embraer is a great aircraft for flights of under 2 hours, but those are just not the distances of Argentina.

This is just trash! Brazil is a country with even greater distances and the Embraers are very successful. The need for Embraers is due to the lower capacity they offer. Many destinations in Argentina don't require that much capacity, but instead they need frequency. That's the beauty of the E-190. Now we're seeing how AR/AU is increasingly making use of them in routes to foreign destinations, since you do need frequency where there's competition. In Argentina, that is less of a problem, since where the capacity is too big, they can just cut frequencies without having to worry about the competition.

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: Viscount724
Posted 2013-04-28 15:50:46 and read 3162 times.

Quoting sciurusmdg (Thread starter):
5. Purchasing Embraer 190 aircraft

Austral bought nearly 30 Embraer 190s and these are no good for Argentina, a country of huge distances, with 5000 kilometers from one end to the other (a 6 hour flight). The Embraer is a great aircraft for flights of under 2 hours, but those are just not the distances of Argentina.

Disagree. I much prefer a 4-abreast E190 to a 6-abreast 737 or A320. AC operates the E190 on quite a few nonstops up to 5 hours or slightly longer. Examples with westbound block times (eastbound about half an hour shorter due winds):

YYZ-SEA, 5 hrs. 15 min.
YUL-YYC, 4 hrs. 40 min.
YUL-YEG, 4 hrs, 33 min.
YYZ-YLW, 4 hrs, 32 min.

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: Gonzalo
Posted 2013-04-28 16:35:30 and read 3059 times.

Quoting motorhussy (Reply 12):
A Left Wing New Zealand Govt. set up this structure.

There is a VERY LONG distance between a "Left Wing New Zealand Govt." and a "Corrupt, mishandled, autocratic Argentinian Govt.".

And other reason no one mentioned so far : 4M. Despite the relatively "low" market share 4M took from AR, the sole existence of 4M is a hard proof for the Argentinian tax payers of a very simple reality : you can provide a decent product and make a profit with an airline, even if you are constantly attacked by the authorities, ALL you have to do is STOP bleeding cash to pay political favours and bribes. This reality is perceived for a big number of Argentinians, who avoid AR at any cost.

Rgds.
G.

Topic: RE: The 10 Reasons Aerolineas Argentinas Is Failing
Username: RyanairGuru
Posted 2013-04-28 18:51:51 and read 2868 times.

Quoting motorhussy (Reply 12):
I think the de Kirchner regime should use NZ as a business model

It's interesting that you mention that.

I did an essay for university about the economic situation in Argentina, and obviously I am in no position whatsoever to promote policy just because I once wrote 3,000 words on the subject(!), I concluded that Argentina should adopt an economic model similar to New Zealand.

(note that this wasn't about aviation specifically)


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