Tuesday, May 10, 2016

NEW AIRLINE PLANS: Irelandia Aviation - Low-Cost Carrier Development Company that Founded Ryanair looks at Argentina

Executives of Irelandia Aviation, the low-cost carrier development company that founded Ryanair and several other LCC's, such as Allegiant Air (USA), Tiger Airways (Singapore), Viva Aerobus (Mexico) and Viva Colombia, recently visited Argentina, apparently to evaluate the possibility of establishing an LCC operation there.  According to the high-quality Argentine weekly airline industry website, Aviacion News, when recently meeting with Argentine Minister of Transport Guillermo Dietrich, the Irelandia executives discovered two formidable barriers to establishing an LCC in the country:

1)  Minimum Airfares Enforced 

The Argentina government regulates the airfares that airlines can charge, with several "bands" of fares with maximums and minimums.  While the government has signaled flexibility with regard to allowing the maximums to increase it will apparently hold steady on not allowing the minimums to drop at all.  The editor of this blog believes that the government fears a sharp increase in already-high losses by Aerolineas Argentinas / Austral should a low-cost operation come into the country, offering fares significantly lower than AR/AU can offer, thereby taking away much of the latter's traffic. 

2) High Degree of Unionization            

Most LCC's require a low level of workforce unionization mostly for flexible work rules for greater efficiency to achieve high productivity.  Contrary to popular perceptions, while some LCC's pay lower-than-average salaries compared to legacy carriers, many do not.  For example, the first, most successful, and best-known LCC, Southwest Airlines has some of the highest wages among US airlines.            

However, airline workers in Argentina are highly-unionized and a union-less carrier or one with only a couple of unions, such as for the pilots, would meet with strong opposition and never be approved politically. 


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