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Competition versus cooperation and low-cost flights

By Thomas Manning
For the Herald

“Competition is always a good thing, it forces us to do our best while a monopoly renders people complacent and satisfied with mediocrity,” the US writer Nancy Pearcey once said.

In Pearcey’s view, and that of the Herald in their June 2 report on the matter, the low-cost airlines poised for take-off in Argentina will be a boon for travellers. Domestic and international air fares in Argentina are very expensive by comparison to Europe and North America where nimble low-cost operators provide much cheaper alternatives to full-service behemoths.

A full-service airline offers a baggage allowance, different cabin classes, airport lounges, frequent flyer schemes and on-board frills like free entertainment and food and beverages and — as there’s nothing surer in life than you get what you pay for — low-cost airlines offer nothing of the sort.

Low-cost’s single benefit is, as their name says, incredibly cheap air fares although you have to pay for baggage and, in all probability, you’ll be crammed like the proverbial sardine between a Sumo wrestler and a highly contagious, influenza-stricken woman with a screaming baby, the passenger behind you will get abusive if you recline your seat (if indeed the seats recline at all) and the cabin crew will not give a fig for your needs or give you anything else for that matter. If you want sustenance during the flight, you have to pay for it.

For flights over two hours, low-cost airlines hold no attraction for me as flying long-haul with the full-service airlines is already challenging enough without ratchetting up the discomfort and claustrophobia any further. But there are plenty of far hardier, more budget-conscious souls out there for whom low-cost is exactly what they want.

Whether those Argentine travellers who want low-cost services will ultimately get them remains to be seen. As the Herald reported, government regulations tightly control the domestic airline market and there’s a serious threat of strikes by unions who have a vested interest in maintaining the closed-shop status quo. There appears to be no immediate prospect of low-cost airlines taking on the transpolar route to Oceania which is the route which interests me the most. In the course of the past three decades I’ve taken hundreds of transpolar flights to Buenos Aires from New Zealand and vice-versa in the course of my work as a business consultant and while I would not use a low-cost service on the route, there’s no doubt that if one existed, full-service airfares would drop, which would be to all travellers’ benefit.

Aerolíneas Argentinas had a monopoly between Argentina and Auckland/Sydney for 34 years (1980 to 2014 with a pause during the Malvinas conflict) and in addition to the fat wallet a monopoly requires, passengers needed extraordinary stamina for the 18-hour-plus flight lengthened by a three-hour refuelling stop in Río Gallegos (hand-pumps!) before Airbus A340 direct flights (around 12 hours) began in this century.

While I have never (as is United Airlines’ wont) been bloodied and dragged backwards off an Aerolineas flight, on several occasions in the interests of reducing the aircraft’s weight passengers were asked to volunteer to wait for the next flight and for their troubles offered a five-star hotel, a cash meal allowance and a seat in business class for the interrupted journey which, needless to say, I leapt at. (United take note!) In 2012 Aerolíneas pulled the plug on its stop-over in Auckland, apparently to save the cost of accommodating crews in the luxurious Stamford Plaza Hotel where they “rested” for between a week and 10 days before returning to Buenos Aires.

Oceania and Asia

Aerolíneas ceased services to Sydney altogether in April, 2014 and left LATAM Airlines as the only Latin American airline servicing Oceania.

From then on the only way to fly to Buenos Aires from New Zealand (or anywhere in South America) without first going to Los Angeles was with LATAM Airlines which entailed a transit in Santiago and the 18-plus hour point-to-point marathons became the norm again (24 hours from Sydney).

To add insult to injury and in affirmation of the power of monopoly, LATAM more than doubled the cost of its Oceania airfares the day Aerolíneas ceased its services.

Aerolíneas and Air New Zealand agreed to co-operate in a code-share alliance and not only did all Oceania airfares across the board almost halve but, compared to the days of yore, the standard of aircraft and in-flight service rose inordinately.

Like manna from heaven for frequent travellers and tourists alike, a direct Air New Zealand service from Auckland to Buenos Aires was inaugurated in December, 2015, first with a Boeing 777 and lately with the state-of-the-art Boeing Dreamliner 787-9. It’s been a very smooth ride so far because the new flight is a collaboration with Aerolineas and as such has fitted seamlessly into the Argentine regulatory framework and poses no threat to union interests, unlike the proposed low-cost services which will go head-to-head with Aerolineas and their unions.

The Air NZ service has proved so popular that next summer there will be five flights a week (from three at the outset) and the airline’s chief networks officer, Stephen Jones, says that daily flights are looking likely if demand continues to grow, which will not only further vitalise Trans-Pacific business and tourism but also Argentina’s burgeoning ties with Asia as the Air NZ service provides by far the fastest way from Buenos Aires to the Far East.

My first flight to Buenos Aires on Air NZ’s Dreamliner was undoubtedly the best transpolar flight I have ever had with incomparable in-flight service — my only niggles would be the freeze-dried instant coffee, sleep deprivation from an aching tailbone (common to Economy Class on all flights) and only one bag included in the fare instead of the standard two (maximum 23 kilos) on all other airlines flying to Argentina.

Competition between LATAM and Air NZ has paid off in cheaper airfares but it was Aerolineas’ cooperation with Air NZ in the first place which bought the competition into play and most importantly, it has been co-operation and not competition which re-established Argentina’s and Aerolíneas’ direct air links to Oceania and fastest connections to Asia.

Thomas Manning is a NZ business consultant specialising in Latin American trade, a former vice-president of the NZ Latin American Business Council and a regular Herald contributor.

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