[ Airlines ] By Pablo Diaz

Norwegian’s Argentinian Venture Set to Cease Operations

Amidst local, global and internal factors, Norwegian seems to be taking steps to sell or close its Argentinian subsidiary, Norwegian Air Argentina (NAA). According to different sources, JetSmart Argentina would absorb the carrier’s operations and set foot in Buenos Aires Aeroparque, abandoning El Palomar airport, currently affected by a judiciary restriction to perform night operations.

At the moment, Norwegian Argentina’s booking system does not take reservations beyond March 28 for any of the routes the company is currently operating.

Although this circumstance may be related to reducing the booking timeframe to have better price predictability in the near future, it would be a conservative approach since other operators have mostly done the opposite: try to sell as much as possible today, with the peso/dollar parity at a known value and obtain liquidity for future operations.

On one hand, Jacob Schram was appointed new CEO of Norwegian, after the departure of Bjørn Kjos in the middle of the year, and officially assumes his role on Jan. 1, 2020. The man currently occupying the position, Geir Karlsen, will once again be Chief Financial Officer while keeping the position of deputy CEO.

Geir Karlsen is the same executive that said last April that the results of the operation in Argentina were going to be closely reviewed and that if the numbers weren’t good, they were prepared to close. And the truth is that if the results were weak at the end of the first quarter with a U.S. Dollar/Argentine Peso exchange rate of 1:45, the situation is far from being better now, with a tremendously more devalued local currency, a very profound recession and the political instability of a change of presidential office.

So, if the idea is to centralize the business where the best margins are, Norwegian Air Argentina’s supporting arguments become quite weak. There were no alterations in the Buenos Aires to London offer for two reasons: first, because the route is extremely good in terms of load factor and revenue, and because it is operated and managed by Norwegian UKI, the long-haul low-cost division based in London Gatwick.

Born in 2017 with an eight-year, 4,3 billion dollars investment plan, Norwegian Air Argentina sought to conquer the domestic market by offering new aircraft with new technology, aimed to win the business traveler as well as the leisure passenger. From the 70 aircraft — 50 Boeing 737s and 20 787s — originally planned, the fleet reached four aircraft at its peak and it is operating three now after one of the 737s headed back to Europe following the 737 MAX grounding. The 146 routes requested from the national authority are far from the six routes being covered now: Bariloche, Iguazú, Ushuaia, Mendoza, Neuquén, and Córdoba.

Regarding JetSmart’s alleged interest, there is no official confirmation so far, but many sources indicate that the first week of December would bring formal steps in the consolidation process.

Aviation has seen this market aperture-crisis-consolidation cycle too many times. The Argentinian economic context and many of the structural decisions of the so-called aircraft revolution have accelerated the cycle and there are fears of it becoming an unrecoverable spin.