Low-cost airline Norwegian Air Shuttle ASA will begin operating flights in Argentina beginning in late 2017, a spokesman said on Friday, as more air travel operators seek a foothold in Latin America’s No. 3 economy.
The company plans to open two or three operating bases and begin passenger flights by November. It already has begun the relevant regulatory processes. Spokesman Alfons Claver did not say which routes the airline plans to run but expects to have bases in Buenos Aires, Cordoba and possibly Mendoza.
“South America is a very interesting market characterized by little competition and high prices,” Claver said in a statement.
He said the company was in the process of sending representatives to Argentina to set up bases and routes. International flights were also a possibility.
Argentina’s domestic airline industry is currently dominated by state-owned Aerolineas Argentinas SA [AERA.UL] and Chilean Latam Airlines Group SA. Long-haul bus routes connecting the country’s major cities and tourist destinations remain a popular form of travel.
Since taking office a year ago, Argentine President Mauricio Macri has pledged to attract international investment to boost the recession-stricken economy and improve the country’s transportation infrastructure, including airports.
In September, the government said it would invest 22.2 billion pesos ($1.39 billion) to modernize the country’s airports in part to boost passenger capacity.
Colombia’s Avianca Holdings SA AVT_p.CN, one of Latin America’s largest airlines, requested approval earlier this month to operate domestic and international flights in Argentina.
Mendoza, the country’s fourth largest city and home to vineyards that are a popular tourist attraction, recently completed an expansion of its airport to allow for more international flights and boost its capacity to 50 daily flights.
Mendoza province Governor Alfredo Cornejo said at an event in New York this week that it plans to operate 30 flights daily by January, up from 21 currently. It also plans routes to Sao Paulo and Rio de Janeiro on Brazil’s Gol Linhas Aereas Inteligentes SA, and to Lima and Santiago through Latam.
Macri has said he wants to make it easier for Argentines to travel internationally without transferring in Buenos Aires.
Norwegian plans to devote between six and 10 aircraft to Argentina and expects to transport between 2 million and 3.5 million people in its first full year of operations in the country.
Reuters
Norwegian Air Shuttle ASA is evaluating plans for a base in Buenos Aires with flights from cities including Oslo, London, Paris, Madrid and Barcelona as the next phase of its long-haul, low-cost expansion strategy.
Services to the Argentinian capital could start in 12 months if government permissions are granted, Bjorn Kjos, the airline’s chief executive officer, said in an interview in Cordoba, adding that the Latin American country’s second-biggest city also has the potential to become a domestic hub.
Norwegian Air has ambitious plans for extending the low-cost travel model to inter-continental flights using a fleet of Boeing Co. 787s that will swell to 42 by 2020. It’s also adding 30 extended-range Airbus Group SE A321neo aircraft that could be used on shorter long-haul routes by 2022, and has even said that smaller 737 Max jets, of which it has 100 on order, might operate some trans-Atlantic services.
South American flights would begin with two 787s and create at least 200 jobs, Kjos said. That would be welcome in Argentina, where a recession deepened in the second quarter as President Mauricio Macri’s efforts to implement free-market reform acted as a brake on an already flagging economy and foreign direct investment has been scarce in recent years.
Argentina is “a hidden jewel,” Kjos said, with “the largest potential I have ever seen” for increasing visits. “But to attract tourists you need to have cheaper flights.” Fares could fall to one-quarter of what airlines now charge, selling from about $300 for a round-trip to Europe, he reckoned. For domestic services a Cordoba-Buenos Aires return would need to be priced at about $50.
Kjos said he’s also speaking with authorities in Chilean capital Santiago about possible routes there, though is less keen on entering the Brazilian market.
Low-cost operations on short-haul routes, in which Norwegian specializes, require intensive timetables to make money and the CEO said planes would need to be in the air 18 or 19 hours a day for the long-haul model to work. That might mean the introduction of connecting or multi-leg fights such as India and South Africa to the Americas via Europe.
Qatar, HNA Moves
South America is attracting outside operators as an economic downturn, weaker local currencies and increased dollar-linked costs squeeze local players.
Qatar Airways said in July it would pay $613 million for up to 10 percent of Latam Airlines Group SA, the region’s biggest carrier, while China’s HNA Group Co. last year acquired a 24 percent stake in Azul Linhas Aereas Brasileiras SA for $450 million. Colombia’s Avianca Holdings SA and Avianca Brasil are seeking separate partners while planning to merge in the longer term.
Norwegian Air is still awaiting permission from the U.S. Department of Transportation to use its Irish subsidiary for trans-Atlantic U.S. flights and has also applied for such rights for its U.K. unit.
Connecting cities on Europe’s Atlantic coast, including Edinburgh, with smaller airports in the eastern U.S., such as New York’s White Plains airfield or Stewart airport, will mean customers paying less than $150 for a round trip starting next year, Kjos said.
The Fornebu, Norway-based carrier also plans to establish a base of American pilots in Fort Lauderdale, Florida, initially hiring as many as 100 cockpit crew if it can expand U.S. operations as planned.
Bloomberg Markets
