Local media in Argentina is reporting that Delta has made an offer to buy Aerolineas Argentinas.
Aerolineas Argentinas joined SkyTeam, the Delta-led alliance, back in 2012. The carrier has 10 Airbus A330s, 46 Boeing 737s, and 24 Embraer E190s. It also has two 737 cargo planes.
- On the one hand, President Javier Milei is willing to have the government sell the state airline to foreign interests.
- On the other hand, with Milei opening domestic routes up to foreign company, owning the Argentine state carrier isn’t worth so much. However this could be a cheap route to access the airline’s fleet of Airbus A330 widebody aircraft.
Aerolineas Argentinas Crew
This Would Match Delta’s Strategy Of Buying Stakes In Airlines Around The World
Delta doesn’t just partner with airlines around the world. For its closest partners, it controls them. They have stakes in Aeromexico; LATAM; Virgin Atlantic; China Eastern; Korean Air; and Air France KLM. They looked at buying ITA Airways (the new Alitalia) as well.
Often these investments are highly strategic. They helped Korean Air management retain control of the carrier. Their Virgin stake is 49%, which is really buying a London Heathrow operation. Buying into LATAM gave them a South America partner while stealing a key component of American’s strategy out from under them.
The U.S. market is mature, and there are only so many growth opportunities here. They can get growth in other parts of the world, as well as access to markets, while cementing close relations.
Aerolineas Argentinas is a basket case but would be better run under Delta. And Delta might gain the opportunity to repurpose some of their widebody aircraft. But it’s also a money-loser unless they can saddle the government with some of its obligations and perhaps even then. Delta does drive very aggressive bargains.
Buenos Aires
Argentina Is Desperate To Offload Aerolineas Argentinas
Argentina has to do something about the loss-making airline which has cumulatively lost $8 billion in taxpayer money since it was renationalized in 2008. And Argentina can’t afford to go deeper.
The country’s annual inflation rate was 211.4% last year. They had negative 5% GDP growth. Just 5% of people lived in poverty in Argentina ten years ago, now 40% do.
This is a country that saw its peak a century ago and has largely been in decline under authoritarian leaders since then. American Airlines stopped accepting cash in the country at the end of last year.
Here's how it looks to pay for a group dinner (and not a particularly expensive one, at that!)
Paying the bill is a whole event! First the guest counts out the bills into piles of 10,000 pesos, then the waiter recounts to make sure it's right pic.twitter.com/9g2RFWNj5M
— Devon ☀️ (@devonzuegel) December 28, 2023
They stopped flying to New York. They stopped flying to Havana. They’ve worked to shed as much as two-thirds of their staff. Delta would be a much stronger operator for the assets, though that could include repurposing some of those assets.
Buenos Aires
This Is Far From A Done Deal
Local media reporting doesn’t suggest a deal is imminent, just that bids have been discussed. Delta tried to buy the new Alitalia and that didn’t work out. No doubt any arrangement would be politically complicated. But it’s something that now seems more possible than it did last week.
Argentina’s economy has changed so fast under the leadership of libertarian Milei that it is easy to give obsolete information. The month-by-month rate of inflation is about 3.5%, a drastic decrease from the 200%+ rate he inherited. He has balanced the govt. budget by the innovative policy of “nominalizing” govt. spending. I.e. instead of increasing spending to keep expenditures the same in real terms, he retained the nominal value of govt. budget categories. At 200% inflation that reduced the real burden of govt. spending drastically.
AA is easy to solve. Just give it to the workers. The private competitors (not mentioned) will take up the slack. New entrants likewise.
In general, what Arg. needs is an unremitting dose of free markets.
Also, 5% poverty would make the country relatively wealthy. The reality is that number is wrong.
https://www.macrotrends.net/global-metrics/countries/ARG/argentina/poverty-rate.
Things are bad but the policies are starting to work. Certainly the corporativist agenda of the Kirshner regime isn’t the solution. It was the problem.
@ Gary — That is soon what paying for dinner in the US will look like, thanks to the moron-elect.
Even for a few paragraphs’ length, this is a poorly written and conceived article. z.B., you state: “[the] carrier has 10 Airbus A320s, 46 Boeing 737s, and 24 Embraer E190s. It also has two 737 cargo planes.” Then in the subparagraph you state that Delta International would benefits from getting its filthy paws on the Argentine wide-body 330s? Of the 82 a/c in its fleet you itemise, not a single mention of any wide-body a/c.
It’s not the role of the reader to decrypt your writing. That’s your job.
Your picture of Argentina’s basket case economy is only half-correct.
Argentina and Uruguay on opposite sides of the River Plate are essentially the same people divided into two countries.
Uruguay is stable, liberal and wealthy. Argentina is Trumpland, with mass poverty (and violent crime) alongside great wealth. Now they are on a “sell-off and privatise everything” blitz, and it’s going even worse than expected!
Same people, but chaos, privatisation and dog-eat-dog in Argentina, while its serious little neighbour is richer, healthier, better educated and more stable!
@DavidF – there’s nothing “Trump-like” in the governance of Argentina that created the economic basketcase
If you want to lose lots of money then invest in Aerolineas. Go get em DAL.
The Delta Latam JV does not include Argentina. There are good reasons why Delta wants a piece of the Argentine market including to Miami. LA serves all of the major S America hubs except for Buenos Aires.
This is all part of squeezing AA in the only international region where it makes money and outsmarting United’s desire to grow its international network
As ever, Tim. Your elementary understanding of revenue accounting and non-op income/expense never ceases to amaze in your network analysis.
Not everything is “squeezing” and “outsmarting”. Only in your weird little world is it so…
Nothing I’d love to see more than DL insert itself into that quagmire.
This is like two people that you absolutely hate getting married to each other. You know they’re going to make each other utterly miserable in record time. And all you can do, or need to do, is kick back and laugh manically.
@DavidF: Don’t pretend to be an economist. You just sound stupid.
But … Delta has hideous problems with the Union-crews at EZE, the International Airport in Buenos Aires! (arrival plane sits for 10 hours, same crew flies back to ATL) For much of last year ATL-EZE was delayed for hours multiple days each week, occasionally the flight canceled; on one of my return flights the plane from ATL arrived 3 hours after the return was scheduled. Last week I saw that another was canceled. Unless they solve that problem, and apparently there’s some issues money couldn’t sooth, then it’ll be a disaster.
There is de minimis value in Aerolineas Argentinas but it comes with guaranteed labor strife from militant unions. Argentina has or will have Open Skies with most of it’s largest trading partners and Millei has eliminated foreign investment controls, and it would be much better to start from scratch without AA’s baggage. My prediction is that AA get’s shut down and a million flowers bloom in its place.
The world could use a few more Javier Milleis and I certainly hope that his brilliance rubs off on the Trump Administration that needs his wisdom. Today he also privatized the Argentine Mail service and opened mail delivery to unlimited competition.
Adding onto what @Tim Dunn said, Buenos Aires performs very well for American Airlines. This is reflected in their schedule there.
The interesting part is that the city suffers from a split hub, so AEP is short haul and EZE largely handles long haul.
So this acquisition isn’t as valuable as one may think. Then again, it’s not like they can use Latam hete as they’re still close to IAG and QR.
Delta plus Latam is as large as AA to S America except for Argentina.
AR is working on plans to fly from AEP to the US but either way there are connections to other parts of Argentina either from EZE or LA hubs.
Delta plays the long strategic game. With flights from MIA or FLL to Central America and key Caribbean markets, Delta could easily exceed AA in Latin America with LA and AR
I would agree that if these reports are true, this could be very risky for Delta. Irrespective of why, Argentina has been politically and economically risky for a couple of centuries, with a long history of instability, authoritarian leaders, desaparecidos, etc.
@A220HubandSpoke–I don’t think the operations at AEP are a problem at all. I think they are an asset. AEP is great for locals and even tourists who want to fly elsewhere in Argentina and are already in BA. It’s close to downtown and is very convenient. You implied that arriving international passengers at EZE who are traveling elsewhere in Argentina have to go to AEP to catch domestic flights after landing. I don’t know if that was your intention but regardless, it’s not true. Most of the same domestic destinations served from AEP are also served from EZE–and if DL buys Aérolineas Argentinas, they will have the ability to make changes if need be. Buenos Aires doesn’t really have a split hub–it has 2 airports that serve slightly different markets. While there are a lot of reasons to exercise caution here, AEP isn’t one of them.
Good luck with that, Delta. Yikes.
On a somewhat related topic, having visited both Chile and Argentina a few times, I always wondered why it impossible to fly between the countries, unless you route through Santiago and Buenos Aires. This makes for some wildly impractical itineraries.
For instance, if you are touring Tierra del Fuego and Patagonia, in the far south of each country, to get from Ushuaia, Argentina, to Puerto Natales, Chile, for access to Torres del Paine, you either fly USH-AEP-SCL-PNT, which is like a 24-hour itinerary, often involving an overnight at SCL, or you fly nonstop to El Calafate, then do a land-border crossing, which is arduous in its own right.
When I asked Argentinians and Chileans why there are no nonstop regional flights between the countries, which would be quick, like 1-hour between USH-PNT, the answers I received were hilarious, such as ‘it’s prohibited’ and ‘there is no market for that’ and my all-time favorite ‘the Andes are too tall’ which makes no sense, because jet aircraft can obviously fly above them.
Anyway, if Delta does proceed with this ‘investment’, maybe they can get on that. *cough*
Milei has about a 50% public approval rating, but poverty levels are sky high still and inflation hasn’t been entirely tamed. For a while Carlos Menem was credited for having seen inflation get tamed down in Argentina, privatizing some stuff and so on. And yet eventually the dollar peg failed it and inflation came back with a vengeance. Milei is in some ways very Trump-like, except his economic approach is more like a radical libertarian or a transition economy figure into shock therapy like some of the Eastern Europeans who led the charge for economic transformation there after the collapse of the Soviet bloc.
The problem with Argentina is that hypercapitalstic rentierism and cronyism is very deeply embedded in a country built on commodities exports, too much domestic market concentration and where import-reliance has not been a blessing for stable economic performance.
Milei has about a 50% public approval rating, but poverty levels are sky high still and inflation hasn’t been entirely tamed. For a while Carlos Menem was credited for having seen inflation get tamed down in Argentina, privatizing some stuff and so on. And yet eventually the dollar peg failed it and inflation came back with a vengeance. Milei is in some ways very Tr*mp-like, except his economic approach is more like a radical libertarian or a transition economy figure into shock therapy like some of the Eastern Europeans who led the charge for economic transformation there after the collapse of the Soviet bloc. The problem with Argentina is that hypercapitalstic rentierism and cronyism is very deeply embedded in a country built on commodities exports, too much domestic market concentration and where import-reliance has not been a blessing for stable economic performance.
There is a lot that is “Tr*mp-like” in the governance of Argentina that created the economic basket-case that is the country. Peronization, for example. And the “stable genius” has Peronized the Republican Party and a lot of America and seems intent upon both Peronizing and Putinizing the country.
That Milei seems to love Tr*mp speaks to how whacky both dudes are.
If Delta can very cheaply buy AR and then strip AR of its assets — like a private equity vulture capitalist engaged in self-dealing — and then dump what remains of AR into complete liquidation, it could be a very financially rewarding move for Delta.
@GUWonder: There is no connection between Peronism and President Trump’s policies. You are being hoodwinked.
No one can hoodwink me on Argentina. I know the country very, very well. And I’m back there twice again later this month and will probably run into Milei.
Tr*mp is like an American version of Peron and has the Republicans behaving like Peronistas. Maybe Melania is his Eva, but Eva didn’t get captured on film willfully showing her naked body to commercial photographers like a naked Playboy/Penthouse centerfold.