Norwegian Air seizes unique airline opportunity in Argentina
South America is a vast, far-away place, but it is to be found on every traveler’s bucket list. Until recently, it has also been an expensive place to fly to. One country, however, the second-largest in the continent, has shaken up its airline industry, scrapping regulation on minimum domestic airfares and allowing low-cost travel around the country, and the continent overall, to skyrocket. That country is Argentina, Latin America’s third-largest economy. And Norwegian Air Shuttle is among the many LCCs joining the race to enter the Argentine airline market, as it prepares to launch its newest subsidiary – Norwegian Air Argentina – in over a month’s time. Norwegian Group believes their offspring carrier should help keep prices low and make travel from South America to other points around the world much easier, as the company keeps expanding its reach in the continent (targeting Brazil in the meantime).
Shaking up the Argentinean airline industry
According to a report by Bloomberg, back in July, 2018, the Argentinean government announced it will curb restrictions on minimum domestic airfares, allowing airlines to drop prices freely for domestic services starting August 15, 2018.
The move comes in an effort to boost tourism and rouse the country’s airline industry, giving routes to new players. President Mauricio Macri’s administration dropped the price ceilings to attract more international carriers.
“Argentina was one of the most expensive countries to fly in the region,” said Transport Minister Guillermo Dietrich. The new rule “offers a lot more opportunities for many people to fly.” According to him, removing the price floor will lead to rising passenger numbers for all airlines.
Previous governments kept the price ceilings in place to protect the state-owned carrier Aerolineas Argentinas, the country’s largest airline and its flag carrier. Brought back from the brink of disappearing by being repossessed by the government in 2008, Aerolineas Argentinas enjoyed protected competition conditions until 2016, Airline Geeks reminds.
The change in airfare regulations, hence, is definitely good news for travelers, but could be controversial for airlines, particularly Argentina’s national carrier. As Condé Nast Traveler writes, labor unions fear the move could lead to job losses at Aerolineas Argentinas, which may struggle to compete with low-cost carriers.
Meanwhile, new low-cost operators celebrated the Argentinean government‘s decision: “it is a good call, good for the carriers, but most of all, for the 93 percent of Argentinians who hasn’t flown yet,” the country’s first (and only, for now) low-cost airline Flybondi stated.
“We created this company because we think Argentina needs a more inclusive market that creates conditions for those that do not choose airplanes as a mean of transportation due to the expensive fares,” the statement concludes, according to Airline Geeks.
Another low-cost carrier, Norwegian Air Shuttle, also praised the decision to remove the price floor: “This measure will contribute in a decisive way to boost the development of the commercial air sector in Argentina,” CEO of Norwegian Air Argentina Ole Christian Melhus was quoted as saying by Bloomberg.
According to Melhus, not only is the decision „appropriate“ for the development of commercial aviation in Argentina, he says his company is „convinced“ that all airlines will benefit from a dynamic market, Airline Geeks reports.
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