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Argentina’s Low Cost Era Has Begun and Airlines are Offering Great Deals

As the low-cost era begins, here are the details and implications.

By | [email protected] | August 1, 2018 1:30pm

2729356w1033Aerolíneas Argentinas lowers prices in the name of competition. (Photo via La Nación)
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Starting today, the elimination of a minimum price floor for plane tickets goes into effect. The government announced the measure on July 2nd and yesterday it was made official in a resolution 656/2018 in the Boletín Oficial. The change was originally slated for August 15th but was moved up, much to the joy of low-cost airlines looking to enter the market. With the law now in place, both low-cost and traditional airlines have announced new fares—some as low as AR $199 for domestic flights.

When the new law was announced last month, Transportation Minister Guillermo Dietrich said that this system would, “produce a reduction in prices and give [users] the possibility of choosing between the most aggressive promotions that the companies will be able to offer.”

Airlines have rushed to meet that expectation, with Flybondi, LATAM, and Aerolíneas Argentinas already announcing competitive promotional deals.

Even in the midst of judicial action against the Flybondi base in El Palomar, the company released prices they’re calling “ultra low cost”: AR $199 one-way flights to such domestic locations as Mendoza, Córdoba, Salta, Bariloche, Buenos Aires, and Tucumán. Although the offer is only for tickets bought today, they promise to offer similar promos on a regular basis.

In response to the recent incidents and legal trouble, Flybondi CEO assured that “with regard to the allegations submitted recently by two prosecutors, we would like to clarify that the company has not been notified of any resolution.” He also clarifies that “Flybondi does not belong to any government official nor political party.”

It’s not just the low-cost airlines taking advantage of the new rule. LATAM announced a week-long deal for domestic flights for as little as AR $449 round-trip. “This promotional offer is made possible through the elimination of the minimum fares in place in the aeronautic sector until now. As such, the flight dates available for this promotion will run between 31/8/2018 and 30/6/2019; excluding holidays, long weekends, and the months of January and February,” the company specified in a statement.

Aerolíneas is offering round-trip flights for as low as AR $341 this week, which according to the company’s Distribution and Revenue Manager is indicative of “a new paradigm in the aero-commercial market, with a very attractive and complete proposal covering the entire country,” he tells Infobae.

Is this a new era for the industry? According to the official resolution, the policy seeks to allow more people access to airline services and to a greater range of destinations, because “the evolution of such interconnection in the national sphere is fundamental, and measures must be taken to meet this objective.”

The communication also reads: “The State should procure the strengthening and development of the aeronautic sector, allowing for the incorporation of new companies into the market, the conservation and creation of direct and indirect employment as a consequence of the development of activity in the framework of current airline policies in force.”

It is evident that this new law removing minimum fares for airline tickets marks not only a move toward national integration through accessible transportation, but also is a sign of concrete government action in support of industry diversification in the context of repeated conflict (see this and this) between established, unionized industries and their less-regulated competitors.