Wednesday, September 4, 2013

LAN Argentina Hangar Dispute - Arguments For & Against

The dispute over LAN Argentina's hangar at Buenos Aires Aeroparque (AEP) stirred much debate during the week of August 26-30 with arguments both for and against the measure. 



* Minister of Transport Florencio Randazzo explained the eviction as part of the Buenos Aires Aeroparque (AEP) master plan put together in 2010 to reorganize the facility, including the use of its hangars, to accommodate growth of 100,000 passengers per month, with 850 million pesos (US$ 150 million at the official exchange rate) being invested in the project. 

* LAN Argentina operated out of AEP for three years, from 2005-2008, without the hangar so why is it so important now ?

* The hangar is not essential to LAN Argentina's operation, it can still operate in the country using hangars at other airports, such as Buenos Aires Ezeiza (EZE). 

* LAN Argentina has had special privileges not given to other airlines, such as discounted jet bridge access at AEP and handling services from ground operator InterCargo so it should not complain about the inconvenience of vacating the hangar.

* LAN Argentina limits its flying in Argentina to fourteen profitable city pairs, while Aerolineas Argentinas flies many more routes, many of which are to unprofitable smaller cities, another reason why LAN Argentina should not complain about abandoning the hangar.


* The airline invested US$ 5 million in building the hangar and pays US$ 20,000 rent plus it has a contract with the airport for its use until 2023.

* The airline actually did have a hangar that it rented at AEP from 2005-2008 prior to occupying its own hangar. 

* While LAN Argentina could use a hangar at EZE, ten of its twelve aircraft are based at AEP and ferrying them to EZE would incur costs and aircraft downtime that would have a significant financial impact on its operation.   

Blog Editor's Comments:

LAN Argentina gets no subsidies while Aerolineas Argentinas gets US$ 1 billion per year.  Compare this to the Essential Air Service program in the United States that subsidizes airline service at 112 airports on 150+ routes that totaled US$ 170 million in 2012.  Why does Aerolineas need six times as much money to subsidize flights to just a few dozen cities at best ?

The Argentine government seems intent on forcing LAN to leave Argentina. The hangar situation is only the latest measure that it has taken to make the company's Argentine operation more costly and difficult.  For a summary of some of these (and also multiple measures against other airlines) see the following blog entry from 20Dec12:

LAN operates divisions in Colombia, Ecuador and Peru without encountering the same difficulties in those countries.  The airline employs some 3,000 people in Argentina creating economic activity and paying taxes.  Why the adversarial approach to this company ? 


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