Is American Airlines Suspending Service To Buenos Aires, Argentina?
South America has been a little bit of a money pit for the airlines lately when you consider that they have tons of cash tied up in Venezuela that the country won’t release.
Enter Buenos Aires, where the government is accusing American Airlines (and others) of launching attacks on their currency.
And today, I have an unconfirmed rumor from employees at both American Airlines and Delta that American Airlines will stop flying to Buenos Aires (EZE) on December 1st of this year. Delta is rumored to be considering the same move, but it appears American Airlines may have already informed some of the employees involved with that station that service is stopping.
The foundation for this most recent move seems to also involve not getting the government to honor financial agreements with the airlines.
Developing…
To be fair it is not “South America” but two countries. By far the majority of South America, in population and GNP, is financially strong and represents no problem. Brazil and Chile both have very substantial foreign exchange reserves, far more than the US, in fact. Peru and most of the rest of South America still pay their bills very well. It does nobody any good to make gross generalisations based on three cases of gross mismanagement, Venezuela, Argentina and the one you did not mention, Bolivia.
Sorry to be so strident, but it is quite frustrating to be lumped in with them. So many people are so ignorant of rarity that this type of generalisation does real harm.
jbcarioca, duly noted, and I don’t have any reason to doubt your assertion that the rest of South America is financially strong. I can say I have relative knowledge as it relates to Brazil and Chile, but not much beyond that. My generalization was more that a key part of American’s South American network might be going away.
I have traveled to BA eight times…the last being this past May. This was the first time I left early as there was an air of desperation in the city. Crime up…two taxi drivers tried to rob me. Costs up…A steak dinner I used to pay $15 for was nearly $70. The “Blue” market rate for dollars was 11 pesos per dollar. Four months later it is 15 per dollar. Sad to see.
I would guess the tourism industry is much bigger in Argentina than Venezuela so it is a little surprising they would target airlines but maybe the desperation for hard currency is getting in the way of rational policy.
As you probably are suggesting, rationality and the Kirstner reign have not been very well acquainted with each other. Everything for parts for Argentina-produced cars to critical medical supplies find themselves prohibited from entry these days. It’s a terrifying time for many people both in Argentina and Venezuela just now. Insanity reigns. We all hope the infection will not spread.
Boy, you guys paint a very inviting picture!
The fact that you can’t even spell the president’s last name (it’s actually Kirchner), that you call it ‘reign’ and that you have the ‘carioca’ in your nickname just shows that you may be a bit biased. It’s bad, but not as bad as you make it look.
With love, from an Argentinean that recently moved to another country and already misses hers (the move was because of work, not running away from the mean Kirstner reign or something like that).
Biased? without any doubt at all! As for her husbands name, I did indeed spell that name incorrectly. What a shame for me, especially since I am prone to be pedantic about such issues. It is true that I am not at all fond of the performance of either her husband or her regarding either mercosur or bilateral affairs with Brazil. In fact I am not exactly overjoyed with the reign of the PT in Brazil either. The issue at hand in this topic refers to fiscal prudence and probity in dealing with international commerce. To present the fiscal management of the current Argentine government in any but a very negative light in that respect requires a great feat of faith in polemics rather than fiscal substance.
Th populace suffers from impecunious government policies. Do you disagree? Do you think AA had a choice other than restrict forward purchases of their product at current Argentine Peso par? After all they never have stopped accepting foreign currency forward purchases. They’re not actually ceasing flights or anything like that, despite the rumors and the title of this blog.
MarkJ, thanks for the context on the situation on the ground. It certainly doesn’t sound very positive.
You are a very unlucky guy… two taxi drivers tried to rob you?
Never in years a steak dinner was $15, from 2005 an MCD burger cost more than $15…so I don’t believe that.
And if you convert from pesos to usd a steak cost less than 7 USD, so..this is expensive?
Great I’m going there in 3 months. Hopefully United doesn’t pull out as well. What will they do with bookings they already have?
Good question. Likely just refund. I wouldn’t make any rash decisions yet since this isn’t confirmed.
As someone who travels to Buenos Aires twice a year (my husband’s family is all there), this would be absolutely devastating. My heart was breaking as I was reading your post. I tweeted AA to see what their response would be and they said the rumors are not true. Fingers crossed!
Andi, I hope it’s not true. The information about the conversations certainly seems reliable at this point, but it’s certainly a fluid situation.
There is no truth to this whatsoever.
There’s certainly truth in the fact that it’s a delicate situation right now. I could certainly see this being “true” based on the facts today and change without public notice. There is real financial risk for the airlines here with the currency fluctuations. I could also see a threat of a suspension as a way to compel the government on certain issues, though I have no idea how successful that would be.
Correct – there is truth to the delicacy of the situation, absolutely.
But there is no truth to the statement that AA is pulling out of Buenos Aires, which is not only it’s fifth busiest long-haul station, but also one of it’s flight attendant crew bases.
Pulling out seems an extreme way to describe it, but considering they cut flights to Venezuela drastically I don’t think it’s as impossible they could reduce/suspend service.
Put another way, given a sway in the political/financial climate, flights to Venezuela aren’t gone forever.
I’m a bit surprised you didn’t mention the 90-day window AA has implemented for ticket purchase and travel. They’re not selling tickets ex-Argentina for travel more than 90 days out now.
That may be part of the source of the rumor and why that (approximate) date comes into play.
* Apparently not selling those. I haven’t confirmed one way or the other but I’ve seen it referenced a few times.
Good point. I meant to mention it and missed getting it into the post. I’m still not 100% sure those two items are linked but you may be right.
Also, while I’m sure it’s happened before, I can’t say I recall a situation like this (the 90-day advance ticket restriction).
There’s 2 ways of seeing this.
The first is that the government of Argentina doesn’t let foreign companies to send their profit to their parent companies in other countries (not only USA) or they do in very little amounts of u$s.
Since AA is selling tickets in Ar$ and they don’t know when they will be authorized to buy u$s, maybe by the time they get the authorization, the’ll be losing money for that tickets.
There’s no 90 day window if you pay for your tickets in u$s in the US or other countries’ AA website.
The second, and most questionable, is what the President of Argentina says. and that is that AA is trying to boycott the AR$, Telling everybody they don’t trust Argentina’s money, since it’s the only company doing this at this time.
Alejandro, good perspective. I don’t know how likely it is for Argentinians to gain access to US $ at this point to purchase tickets, nor do I have a firm handle on how much cash Argentina is allowing airlines to repatriate. Given the size of their position in Argentina, I think it’s fair to assume they have one of the larger cash positions/exposure amongst the major US carriers.
This subject deserves some clarity. A few days ago AA restricted sales on flights to Argentina more than 90 days in advance. Among others, Bloomberg reported this:
http://www.bloomberg.com/news/2014-09-18/american-airlines-joins-attacks-on-peso-argentina-says.html
in the meantime there were also numerous unofficial comments that AA would no longer accept Argentine Pesos for ticket payments. Many people had used Blue Market Pesos to buy tickets in cash in Argentina because they gained vs the official rates used for ticket pricing. There is a clear battle going on because even though airlines are still being paid they’re losing money on FX, so restricting advance sales does help reduce those losses even if they do not reduce flights. That said, rumours still abound, especially because the Venezuela case has resulted in dramatic flight reductions by foreign carriers. Nobody, I was told by “an authoritative source” can say what might happen, but there is “no current plan” to actually stop flights to Argentina by AA. I believe that is true, but nobody should be surprised if it happens either. Still, there is no risk in buying AA ticket stock in US$ even if they stop, because they’ll refund the tickets.
just in case there is any doubt, AA has more flights to more destinations in South American than does any other carrier and they have stellar earnings in the region, despite losses incurred in Venezuela. They certainly do not want to repeat that experience so they’re being cautious. I, for one, think they’re acting prudently.