April 28, 2020 / 9:43 PM / 2 months ago

Argentine budget airlines say government blindsided them with travel ban

SAO PAULO/BUENOS AIRES (Reuters) - Argentina’s two low-cost airlines on Tuesday accused its Peronist government of lying about whether the implementation of an air travel ban to combat the coronavirus had been discussed with the industry beforehand.

Earlier this week, Argentina prohibited all commercial flights and ticket sales until Sept. 1, making for one of the toughest travel bans currently in place around the world.

The carriers, which compete with the country’s largest airline, Aerolineas Argentinas, which is state-owned and funded by taxpayers, said they were blindsided and accused the government of ignoring the concerns of the private air travel industry.

“We had no idea that a discussion about (the travel ban)existed, least of all that a decision had been made,” said Estuardo Ortíz, the chief executive officer of JetSMART, which recently started domestic flights in Argentina.

Esteban Tossutti, the president of Flybondi, said the decision took him equally by surprise, adding that the government had not since explained why it took such a drastic step.

“Nobody knows the answer as to why they picked that date, Sept. 1,” Tossutti said.

He said Argentina’s airlines held a unproductive meeting with the government less than two weeks ago, but that there were no hints then an extended travel ban was coming.

Like most airlines around the world, Flybondi and JetSMART are seeking government support to weather the crisis.

Argentina’s left-wing President Alberto Fernandez’s administration has insisted it consulted with the industry before implementing the ban.

“That date was arranged with the airlines,” said a government spokesman on Monday. “This decision was not unilateral.” The same spokesman declined to comment on Tuesday’s claims by JetSMART and Flybondi.

“Unless the Argentine government knows something that we do not - because no country has taken this measure - this travel ban is excessive,” said Carlos Ozores, a principal at the ICF consultancy, which advises airlines. “I don’t understand their motivation.”

LATAM Airlines Group (LTM.SN), which also operates domestic flights in Argentina among other countries, declined to comment. Aerolineas did not respond to a request for comment.

LOW-COSTS IN DANGER

The state-owned carrier’s market share has been challenged in recent years by the aggressive pricing strategies of airlines like Flybondi, which in turn were set up thanks to the support of the previous administration, headed by President Mauricio Macri, a right-wing politician.

Argentina had been one of the few Latin American success stories for low-cost carriers, even as countries like neighboring Brazil have said they are open to a more competitive air travel industry.

Setting up private airlines to challenge Aerolineas Argentinas has been risky, even in normal times.

Avianca Argentina, an affiliate of the Colombian carrier Avianca (AVT_p.CN), went out of business less than two years after launch. Norwegian Air Shuttle (NWC.OL) ended up selling its subsidiary to JetSMART after only a year.

While Flybondi and JetSMART have not yet laid off workers, they have slashed salaries due to the coronavirus flight ban, which was originally set to expire in May.

“Low cost carriers need to sell tickets three months in advance, said Tossutti from Flybondi. “Now they are telling us not only that we cannot fly but that we cannot sell tickets.”

Reporting by Marcelo Rochabrun in Sao Paulo and Eliana Raszewski in Buenos Aires; Additional reporting by Cassandra Garrison in Buenos Aires; Editing by Tom Brown

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