Last August 24 was published an article by Professor Andrés Hatum entitled Southwest Airlines: the counter face of Aerolíneas. In the article, the author makes a series of statements that show a profoundly wrong approach about the air commercial business.
Hatum’s proposal is that Aerolíneas has a business strategy as that of Southwest.
Among the passenger commercial airlines there are basically three business models: Traditional or network airlines, low-cost airlines and charter operators. Network airlines are the most common and most experienced commercial airlines such as Aerolineas Argentinas, LAN Chile, Tam, Avianca, American Airlines, Iberia, Air France, etc. These airlines operate through hubs, i.e. connecting a large number of international, regional and domestic flights that allow its passengers to buy tickets to multiple world destinations of the world. These airlines offer a complex product, strongly supported by alliances with other airlines, thereby offering a product globally. They have a fleet that gives them some operational versatility with short, medium and long haul aircrafts that allow it to accommodate its offer to a complex demand. The low-cost airlines such as Southwest mainly operate short and medium range flights at secondary airports with a point-to-point service, as pointed out by Hatum in his article. The two types of carriers are to some extent complementary, aimed at different markets and offer different products. The network airlines point to corporate traffic and long-haul tourism traffic, while low-cost airlines point to tourist and ethnic traffic for primarily domestic flights.
Aerolíneas clearly has a dominant role in domestic air commercial market, as the network airline with the largest market share in the country, 85% on domestic flights and 20% on international flights. Abandoning this leading role to operate underutilized airports (of which there is none in our country) makes no sense. In fact, LAN Argentina operates at the Aeroparque Metropolitan Airport and does not even consent to move its operation to Ezeiza, much less would do it to a secondary airport. In Argentina, as well as in Chile, Uruguay, Paraguay, Bolivia or Colombia there is no market size large enough for the emergence of a low-cost airline. They do exist in Brazil or Mexico and in Panama, with the exceptional case of COPA, which has a truly unique business model.
The reality is that between the Argentine and the US air commercial markets there is an abysmal difference. Trying to apply a USA business model in Argentina with the differences in scale and purchasing power of these populations is an absolute nonsense that does not support any analysis.
Professor Hatum adds to his initial confusion that the key to efficiency is in the way of selecting human resources and that while Aerolineas Argentinas has fuzzy selection rules, Southwest instead has a highly sophisticated recruitment system. In this regard, it should be noted that the recruitment system of Southwest does not appear to have substantial differences with the recruitment systems, which most airlines including Aerolineas Argentinas have. Regarding its top management, it was principally selected by Aerolineas Argentinas with the assistance of a consulting firm to which Hatum himself was working.
Beyond the above-mentioned unhappy article, it is repeatedly postulated that Aerolíneas would be better managed if an experienced private management would be put at the head of its management. This statement overlooks two issues: On one hand, the private managements of Iberia first, then American Airlines and finally Marsans were disastrous and a setback for both the company and the commercial air transport in Argentina. Moreover, and as we have said ad nauseam, the private administration’s way (which only look at profits) to cut losses is the adjustment. The State took over a company that had a deficit equal to 100% of its turnover. In order to achieve the cost efficiency of Southwest and assuming the possibility of counting on 40 aircrafts of those available in 2008, the neoliberal recipe would have been to fire 5,000 of the 9,000 employees of that year. Aerolíneas, contrary to the orthodox prescriptions to which they want to condemn us and according to instructions of the National Congress and the President of the Republic chose to grow and as a result we have reduced the deficit to just 10% of our turnover with a fleet of 75 state-of-the-art aircrafts.
Currently, we employ about 12,000 workers, but the number of employees per aircraft is less than half of that in Latam and half of the number when the State took over the company in 2008.
Dressed up as first world, they invited us repeatedly to return to the adjustment and austerity that have devastated our people and led us in 2001 into the worst crisis in our history. We have proved with facts that another way is possible; Aerolíneas workers know it and passengers live it every day.