Legislators of the Civic Coalition presented a letter to the National Commission for the Defense of Competition (CNDC), in which they ask to stop the decree that establishes minimum rates for low cost and to previously carry out a market analysis.
The petition was promoted by the Buenos Aires legislator Hernán Reyes and the national deputies Maximiliano Ferraro and Juan Manuel López, who appeared as “users” to protest against Decree 879 that reestablishes the minimum bands for cabotage air transport, a system of prices that had lost validity since 2014, during the previous K administration, when La Cámpora decided not to update them with inflation.
“We need the CNDC to do a market analysis and establish pro-competitive proposals throughout the vertical of ground services. Meanwhile, it is necessary that the effects of the Decree be suspended in a precautionary manner to prevent this new framework from beginning to distort, “the legislators stated.
In this sense, they indicated that they do not agree to “limit” competition.
Jet Smart, one of the two low cost airlines that is affected by the decree.
“During the previous government, a process began that, despite its mistakes, was very virtuous. More airlines, new sections, more trips and many more passengers. Since December 2019 the national government pulls back. We need to deepen our work on opening airports with less expensive services for low-cost companies, reducing the operating costs of traditional airlines and opening new tenders, “they added.
The legislators clarified that it is not about closing Aerolineas Argentinas, but about “force her to compete”. And they explained: “Be efficient and offer a better service. If they choose it, it may be because it is the best. The most experienced and trained personnel already have it.”
Through Decree 879 published last Friday in the Official Gazette, the Government made the decision that within a period “no more than 180 days” the Transportation portfolio applies new maximum rates and conforms to a rate band system for regular internal commercial air transportation services.
The application of minimum fare bands results, in fact, a limit to the commercial expansion of the only two airlines that today offer competition to Aerolineas Argentinas in the domestic market: the “low cost” JetSmart and Flybondi, which had arrived in the country as of 2017, during the previous administration, with the premise of competing in the range of minimum prices.
What was the government’s justification? In the recitals, the decree says: “An analysis has been made of the balance sheets presented by the transport companies that operate regular services with free ticket sales and it was concluded that the economic result of all the companies is negative, which indicates that the revenues from the aeronautical activity are not enough to cover the direct and indirect costs of the same, for several years, as a result of the setting of predatory rates, which led to the collapse of the system “.
Anyway, airlines tend to refer more to the price of the dollar as a cause of their losses, mainly from the devaluation of 2018, when the price of the dollar rose from 20 to 40 pesos in a few months: for local lines, which bill their tickets in pesos, it represented an increase of 100% in their costs in dollars, which in turn represent between 40% and 60% of overhead costs.
But the decree published last Friday, in addition, in fact returns the monopoly of the ramp service to the state company Intercargo, whose policy (and cash), like Aerolineas Argentinas, is under the political control of the La Cámpora group.
“The national government wants to maintain the concession to Intercargo (a state company) instead of allowing different companies to compete to provide that service more efficiently. This Decree returns to the 1990 concession and maintains a monopoly that hurts everyone“conclude the legislators of the Civic Coalition.