The chronic problems of foreign currency shortages and the government hurdles in addressing them once again pose a challenge to the Argentine commercial aviation market, and especially to Flybondi, the country’s second-largest airline with a 20% market share. In the middle of last year they also suffered a similar situation when debts close to USD 15 million accumulated.
The ultra low-cost airline informed this Friday that “due to the systematic delays in the approval of payments for services abroad due to past and current restrictions, the airlines’ ability to meet commitments made to their passengers and suppliers is being compromised.”
They also pointed out that the new instruments created by the government of Javier Milei do not meet the expectations of the suppliers (referring to BOPREAL, the bond created for importers of goods and services to settle their debts abroad, which during the last part of Alberto Fernandez’s government reached USD 60 billion).
This situation has led lessors to require Flybondi to ground part of its fleet, occurring at the peak of the summer season, causing cancellations and rescheduling that, according to the company, affect more than 1,300 passengers per day.
“It is important to remember that more than 70% of the operating costs of airlines are linked to the dollar, covering fundamental aspects such as aircraft leasing contracts, spare parts services, and airworthiness systems, among others,” said Flybondi, emphasizing that they maintain contact with the authorities, to whom they expressed “their concern about this situation, warning of the necessary regularization, seeking not to replicate with other suppliers who are essential for the air operation and who are in a similar situation due to lack of payment.”
“Flybondi reiterates the importance of considering that the commercial aviation industry is governed by international standards of contracting suppliers, which demands a system with greater agility so that it does not impact the connectivity of the provinces, the Argentine economy, and the passengers, who are the main victims,” concludes the statement.
The statement does not detail the number of planes affected at the moment, but an internal memo accessed by Aviacionline details the specific request of a lessor to ground an airplane “immediately,” and the return of the same “due to the loss of confidence in the country.” This refers to the Boeing 737-800 registration LV-KGN owned by Aviation Capital Group.
The situation of the fleet becomes more complex because the company also has three other aircraft in maintenance tasks that cannot be completed due to the inability to make payments to suppliers (one is undergoing C Check in Costa Rica), plus another aircraft out of service after the tail strike suffered in Mar del Plata last week. This leaves only 10 of its 15 planes operational, a significant proportion but, as they had made a more conservative schedule for the summer, it would not be so serious unless daily contingencies occur.
While the problem of the lack of foreign currency affects the entire industry, Flybondi faces disadvantages compared to Aerolíneas Argentinas and JetSMART. On the one hand, the state company has some margin to make payments due to the sales generated by its international network, while JetSMART can also do so via its parent company in Chile. Flybondi, on the other hand, relies almost entirely on its domestic operation, and its parent company is in Argentina (even though it has foreign investors).
The paradox is that this occurs at the same time that the administration of Javier Milei has proposed a deregulation of commercial aviation to further invigorate the Argentine market.
Although industry sources recognize that there is a very important bottleneck inherited from the previous government, they need a special focus on commercial aviation given its peculiarities.
