After several days of rumors, today it was confirmed that JetSmart is taking over the routes of Norwegian Argentina, which thus leaves the country. Beyond Norwegian’s punctual decision, the consolidation of the Argentine cabotage market was to be expected. A few days ago we published a new podcast of Storytravelling Travel Blog, and there we analyzed how the combination of costs in dollars, fares in pesos and low occupancy of flights would surely lead to changes in the short term in the local air market. It didn’t take long, you have to admit.
For the outgoing government, the growth in the supply of domestic flights was one of the points that stood out most. The supply of flights grew substantially, with 55% more passengers transported in 2018 compared to 2015, as highlighted a few days ago by the Secretariat of Tourism. Last year, a total of 5.6 million passengers were carried on domestic flights.
But the future issue is going to be how sustainable this offer is in cabotage. Norwegian’s departure consolidates the low-cost airline market in FlyBondi and JetSmart. Then the rest of the market is shared between Aerolíneas Argentinas, LATAM Argentina and Andes, although the latter had financial problems throughout 2019.
Another important issue is the occupancy factor. Because of their characteristics, low-cost airlines need to have a high occupancy rate and long hours in the air for the economic equation to work. Fares may be lower than the competition, but you have to have full planes to be able to sell the extras. Norwegian was improving its occupancy factor, but in October of this year it was at 74% while FlyBondi reached 87%. JetSmart, by the way, is at 73%, and surely absorbing Norwegian routes will be the first step towards a search for a better occupation during 2020.
In the coming months Norwegian’s Boeing 737 aircraft will be replaced by the Airbus A320 used by JetSmart. Norwegian will not mind these three aircraft, as it has 18 Boeing 737 MAX aircraft on the ground until its safety issues are resolved.
I read in some media that JetSmart would absorb the employees of Norwegian Argentina, but in JetSmart’s press release there are no details about it. I already sent a query to the press people, if there is news I update.