Interview: Martín Eurnekian
How is the sector responding to changing policies?
MARTIN EURNEKIAN: The government of President Mauricio Macri has prioritised promoting domestic air transport under the so-called Aeroplane Revolution. This industry depends on the volume of activity, with greater volumes positively correlating to sector strength. It is important to understand the origin of demand and make strategic investments to maximise returns.
The plan is to generate competition by introducing more airlines. It is the first time that we have seen a push to grow the market rather than one particular company. The market has responded with the arrival and operation of national and international airlines.
Infrastructure development is also under way. The construction and operation of an airport offer significant investment opportunities, including in air traffic control systems or advanced signalling equipment.
How does air transport in Argentina compare to other countries in Latin America?
EURNEKIAN: There are 37m annual air passengers in Argentina. This is heavily concentrated in the two airports in Buenos Aires, through which 25m of these passengers travel. Airports in the rest of the country report much lower figures, so domestic flights are dominated by those to and from Buenos Aires.
That being said, the airport and fares system was designed to encourage local activity. Domestic tariffs are relatively low, at about $3 compared to $12 in neighbouring countries. However, we are still a long way from achieving activity levels that match the region. For example, Brazil has a much higher flight per capita rate.
On another note, airlines in Argentina are expected to have the lowest possible cost, with a fixed cost rather than one depending on the number of passengers. This means airport tariffs and fares in Argentina vary widely from those in other Latin American countries. In any case, we have a long way to go to enhance the use of the aeroplane as a domestic means of transport.
To what extent would the deregulation of air transport benefit the domestic market?
EURNEKIAN: This is an issue that generates interesting debates worldwide, and Argentina is no exception. In all sectors there is a time when government will is necessary to promote development and consolidation. After this, it can be liberalised to promote competition without running the risk of weakening the market.
There are several levels of deregulation in airports worldwide, but it is never completely deregulated, not even in countries such as England, in which London has several airports and operators. This is because some factors in air traffic are of national interest, such as border security for people, animals and products.
In Argentina the state defines how the sector is regulated and determines the rates applied. The domestic market is currently too small to effectively liberalise.
What is Argentina’s position in the global context of growing air traffic, specifically in emerging markets?
EURNEKIAN: Globalisation means that air traffic is growing throughout the world. This can create greater connection among countries, in not only transport, but also commerce and the social sphere.
Before talking about the growth of air transport in emerging markets, international actors must agree on a path towards development, as various global powers have been moving in opposite directions in recent years. Therefore, if these players can reach a consensus on their future macroeconomic goals, this will strengthen the international air traffic sector.
That being said, passengers are undeniably growing in emerging markets, especially due to greater middle-class development. In Argentina, many still use the bus for long-distance travel, but we have seen this rapidly changing thanks to the measures implemented to support airport growth since the beginning of President Macri’s administration. We see this as a positive sign and expect this emphasis to continue in the coming years.