Deficit of Aerolineas Argentinas: 20 pilots per plane and 200 rooms per night

The millionaire losses of Argentine airline Aerolíneas Argentinas returned to the center of attention.

The persistent deficit presented by Argentina’s flag carrier, which according to the company’s balance sheets, reached US$438 million in 2021 and had exceeded US$650 million per year in the two previous fiscal years, came under the spotlight again after former President Mauricio Macri stated in an interview that “we do not have to put one more dollar” to finance it.

The key fact: According to Bloomberg Línea, Aerolíneas Argentinas currently has between 18.8 and 20.5 pilots per aircraft and pays for an average of 200 hotel rooms per night abroad.

The debate on Aerolíneas Argentinas’ losses is far from being new. But this does not make it any less topical.

For years, the different governments have been unable or unwilling to cut the yearly losses reflected in their balance sheets.

For this reason, in the context of a severe shortage of net reserves in the Argentine Central Bank (BCRA), it is expected that the company’s deficit will again play a central role in the debates before next year’s presidential elections.

With nuances, the opposition will propose -with more or less intensity- changes so that the company stops costing the country the millions of dollars it does not have.

But the tone, according to Franco Rinaldi, former candidate for deputy of “Juntos por el Cambio” (Together for Change) party, will become more moderate as the elections draw nearer.

Baglini’s theorem states that the farther one is from power, the more irresponsible the political statements are; the closer, the more sensible and reasonable they become, would be fulfilled once again in case Juntos por el Cambio returns to power.

On the other hand, the aeronautical consultant and author of the book “Aerolíneas Argentinas: 2000 days of losses” (2014) imagine that an eventual new government of Juntos por el Cambio will have to start, at the latest in the first 100 days, a restructuring process “with competent people”.

On the other hand, if the ruling party wins reelection, it is unlikely that measures of this caliber will be considered.

After all, the re-establishment of Aerolíneas Argentinas has been one of the flags of Kirchnerism in the last years.

Instead, they will undoubtedly continue to bet on cutting losses, as the head of Aerolíneas Argentinas, Pablo Ceriani, argued last Monday.

“The loss Mauricio Macri is talking about corresponds to his last year in office. In 2021, Aerolíneas’ deficit was reduced by 35% compared to 2019, and year by year, we will continue to improve its performance, with growth and expansion, not with adjustment and at the cost of connectivity,” he expressed through a message on his Twitter account.

Ceriani thus crossed former President Macri, who said that Aerolíneas Argentinas cost the country about US$700 million annually.

DID THE DEFICIT GROW OR SHRINK?

On June 9, through a press release, Aerolíneas Argentinas highlighted that in 2021, it reduced its loss by 34% compared to 2019.

According to its last balance sheet, approved by the General Audit Office of the Nation and audited by the international firm KPMG, the company obtained “a negative result of US$438 million, which if compared to the US$667 million of 2019 means a reduction in the loss of US$229 million.”

“It is important to mention that the contributions from the State during 2021 were ARS 65.8 billion (US$447 million), of which ARS 35.2 billion returned to the State’s coffers as taxes and fees,” the company added in the text above.

In addition, the state-owned airline recalled that by the end of 2020, the merger between Aerolíneas Argentinas and Austral was completed, which “allowed eliminating duplicated structures and generating greater efficiency in using resources”.

The company also pointed out that, except Copa Airlines, which had a positive balance of US$50 million, all the airlines in the region had negative results: LATAM (US$4.1 billion), Gol (US$1.4 billion), Aeroméxico (US$1 billion), and Azul (US$886 million).

On the other hand, the company emphasizes another, not minor, issue. They point out that, as of September 23, they had received ARS 34.7 billion, 47.6% of the ARS 72.9 billion budgeted for the company for 2022.

MASSA’S BUDGET CUT

For 2023, meanwhile, the Budget bill presented in the middle of the month by the Minister of Economy, Sergio Massa, foresees a significant cut for the state-owned airline.

He assigned resources for about  ARS 90 billion, 23% more than the current year and well below the estimated inflation for the period, which the government projects will be around 60%.

Despite this, a sector of the opposition insists that the company’s losses increase. The reason? Although Aerolíneas Argentinas may have cut its losses by 34% compared to 2019, it managed to do so because it received higher transfers from the State.

As revealed by Chequeado.com, taking data from the government site Presupuesto Abierto, the Treasury assistance to Aerolíneas Argentinas jumped from ARS 23.1 billion in 2019 to ARS 63.6 billion in 2021, 174.8% more. Well above the accumulated inflation in that period.

But measured in dollars, according to the average annual quotation, the Treasury’s assistance to the company climbed from US$479 million in 2019 to US$669 million in 2021.

As of August 10, added Chequeado according to the Budget Execution available until then, the transfers already amounted to ARS 72.9 billion, some US$636 million.

Another view is provided by a recent Congressional Budget Office (CBO) report. It showed that Aerolíneas Argentinas is the fourth public company that received the highest total transfers from the Treasury.

But suppose the State contributions are excluded from the result. In that case, it adds, Aerolíneas Argentinas is the third public company with the highest deficit, with a loss of ARS 108 billion and only surpassed by Aysa, which lost ARS 110 billion, and IEASA, with a deficit of ARS 137 billion.

Nevertheless, the PPO’s work concludes that Argentina’s flag carrier has a level of financial autonomy, understood as the ratio between its own revenues and total resources, of 53.3%.

That is below the average financial autonomy of Argentine public companies, which is 74.4% (although if YPF is excluded, this average drops to 42.2%).

200 ROOMS PER NIGHT AND 20 PILOTS PER AIRCRAFT

In dialogue with Bloomberg Línea, Franco Rinaldi considers that Aerolíneas Argentinas generates so much debate, being that it is not the only loss-making public company -and it is not even the one with the biggest losses- because it represents a sort of mirror of the country.

“It’s like a mini Argentina, the symbol of something that doesn’t work,” he says.

To be a healthy company, he calculates, Aerolíneas Argentinas should have no more than 7,000 employees, far fewer than the 11,393 it has today and the 10,230 it had at the end of 2019, according to the company’s balance sheets.

Despite this, the official Human Resources data handled within the company is that the number of employees has been reduced since December 2019 and that there are 653 fewer employees today.

According to official records, Aerolíneas Argentinas has a fleet of 77 aircraft, of which 24 are its own.

Of the remaining, six are under the denomination “financial leasing”, which implies that they will be owned when they finish being paid, and 47 are under the “operating leasing” figure.

In other words, they are leased. These leases, Rinaldi estimates, have a monthly cost of some US$150,000.

On the other hand, the former deputy candidate of Juntos por el Cambio estimates that, of the total number of employees, some 1,100 are pilots or co-pilots.

That would imply that, on average, Aerolíneas Argentinas would have more than 14 pilots per aircraft. But such an estimate, it adds, would mean that the entire fleet would be operational, which is not the case.

As Bloomberg Línea confirmed, the total number of pilots today amounts to 1,130, and the number of operational aircraft is around 55 to 60. It means that Aerolíneas Argentinas has between 18.8 and 20.5 pilots per aircraft.

Despite this, the airline emphasizes that the number of pilots has decreased since the change of management.

According to figures handled by the company, from 2019 to today, there are 93 fewer pilots, and compared to the peak of 2018, the number of pilots was reduced by 162.

But in addition, the company marks that the new collective bargaining agreement cut the stipulated breaks. Decree 877/2021, published on December 23 last year in the Official Gazette, reduced the rest times in the scales.

Thus, according to the company, there is no longer any possibility for a crew to spend four days resting in the United States or Europe.

At the most, they point out, the crews return before completing 48 hours or two nights at the destination. And even many postings – such as São Paulo or Rio de Janeiro – are without stopover rest, meaning the crew returns the same day.

This issue is critical if we consider the costs that the airline must absorb during this break, first of all, accommodation.

According to Bloomberg Línea, between the crew and delayed passengers, every night, Aerolíneas Argentinas must face the costs of an average of 200 rooms abroad.

In addition, crew members traveling abroad are paid an average per diem of about US$150 per day. These amounts, however, vary according to the destination and even the type of aircraft.

With information from Bloomberg