A little less than a week after the signing of the Memorandum of Understanding between Argentina and Uruguay for the “liberalization of flightsthe provisions of said memorandum were finally known.
Beyond the already announced release of frequencies, which allows each operator to determine the amount of services it will operate in the neighboring country, the agreement authorizes the use of up to ninth freedom of the air between any point of the Eastern Republic of Uruguay and the Argentine Republic, and vice versa, using any intermediate point, and allowing autonomous cabotage of a company in foreign territory.
MEMORANDUM OF UNDERSTANDING BETWEEN ARGENTINA AND URUGUAY
This provision will not only allow, for example, an Argentine company offers a domestic section (Montevideo-Punta del Este) in continuity of a Buenos Aires-Montevideo flight, but rather a domestic flight could operate in Uruguay with total independence of the international section.
In the opposite direction, a company based in Uruguay could operate a Córdoba-Bariloche flight (again, to give an example) without having to tie it to an international operation.
In the event that the cabotage leg was part of an itinerary that begins or ends in the country in which the airline is based, said operation would be part of the eighth freedom of the air (known as consecutive cabotage)which is also permitted in the aforementioned Memorandum.
These freedoms, along with the sixth (right to carry out commercial flights between two other states via its own territory) and seventh (right to carry out commercial flights entirely outside its territory), They give the agreement an unprecedented range of possibilities between both countries, comparable to the Memorandum signed with Chile, which contemplates similar characteristics.
In addition to these conditions – applicable to regular, non-scheduled commercial and air cargo flights – progress is being made on a technical agreement on double surveillance for “ensure operational safety“, which implies that aircraft from both countries will be authorized to operate in both territories.
A question of scale: triumphs and risks of total opening
Although air freedoms have been enshrined for years, there are really few scenarios in which they are applied without restrictions. The United States and Europe, perceived by public opinion as deregulated air markets, are far from interpreting “Open Skies” policies as a framework that allows equality between local and foreign operators.
The doubt that arises in the Argentine market – and by extension, in the South American market – is what the impact will be on local airlines, which after decades of operation in a heavily regulated market would face a possible (note the emphasis on possible) disembarkation of foreign operators with greater scale and flexibility, in a shrinking airline scenario.
The economic situation of Argentinacomplex for years and with timid growth prospects in the medium term that begins with an abrupt fall in the short-term. does not favor the growth of the airline market.
Added to the situation is the elimination of a program to promote domestic tourism such as Previaje – born from the need to recover a tourism industry destroyed after the pandemic -, which managed to break with the seasonality of demand and was recognized as a good idea by locals and strangers.
MEMORANDUM OF UNDERSTANDING BETWEEN ARGENTINA AND CHILE
Inbound tourism also suffered a significant blow, when the adjustment of relative prices and the official exchange rate made Argentina a “less cheap” destination. A direct consequence of this change in conditions was the elimination of the direct link between Buenos Aires and Concepción (Chile), which is maintained via SCL.
The opening, held before the microphones, generates concern among national operators. “It is an important step, but they are starting with dessert. “There are a thousand things to do before releasing everything,” said a senior executive of one of the airlines that have planes with Argentine registration.
Fishing in the fish tank
The truth is that the much-touted opening, today, exists on paper because beyond these giant steps taken with Uruguay and Chile, the rest of the signed agreements stop well before the eighth and ninth freedoms of the air.
In any case, the conditions will be in place for fierce competition between operators, in which everyone will have to advance in the search for efficiency in order to remain standing. As seen before, the Argentine market does not have room for more operators – and even less in this economic situation -, so a million more passengers, a million fewer passengers, The market for which they will compete is basically the one that exists today.
The Argentine airlines got together at the end of last year, prior to the ballot, to send a clear message: we are fine like this, competing among ourselves. At that moment, They were not united by love, but by fear.
However, that pax argenta was short-lived and today, with goals and business models that have similarities and differences, they are all united by a common objective: survival. For many years it was thought – not without a certain degree of truth – that a closed market only allowed one operator to fish in the tank and that was the only cause of the poor development of Argentine aviation, when compared to that of other countries in the region. We will have to see in the near future who was right. And how much it costs to find out.
