Aerolineas' new management team work on transformation plan

Cartagena
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After several years of languishing, Aerolineas Argentinas under its new management team has embarked on a major transformation which will see the Buenos Aires carrier completely renew its ageing fleet in only two years and rebuild its once extensive international network.

New chief commercial officer Juan Pablo Lafosse says Aerolineas is working with US consulting firm Oliver Wyman on a "transformation plan" that should lead to radical changes at the carrier. "We're looking at the whole company - maintenance, operations and revenue management," he explains.

Lafosse, who previously owned one of Argentina's largest travel agencies and is still the owner and president of a large hotel chain, joined Aerolineas in September along with chief financial officer Axel Kicillof. The duo and Mariano Recalde, who took over as Aerolineas' chief executive in July, form the carrier's new top executive team. Since early October they have been working with a team of eight Oliver Wyman consultants on a transformation plan which should be completed at the end of this year.

Lafosse says Aerolineas had already begun working at overhauling its operations and on-time performance has already improved from 50% to 80%. "Our target is to get to 88% to 90% by the end of the year. It's a huge change," he says.

Improved reliability

Lafosse says the introduction of new Boeing 737 aircraft has driven the recent reliability improvement. Only six months after the carrier took its first new aircraft in several years, Aerolineas is now already halfway through renewing its fleet of ageing 737-200s and -500s. These are being replaced with new 737-700/800s.

T

lafosse (200), aerolineas billypix 
 ©Billypix
he entire Boeing MD-80 fleet at domestic subsidiary Austral will also be replaced. Renewal of this fleet will, with new Embraer E-190 regional jets, begin next April and run to March 2011. Finally, Aerolineas plans to purchase or lease over the next year six Airbus A330-300s and seven A340-600s, most of which will be deployed for expansion internationally.

Aerolineas has scaled back its long-haul network considerably over recent years and the carrier currently only serves a handful of cities outside of South America; Miami, Madrid, Barcelona and Rome. But Lafosse says Aerolineas' new business plan calls for the resumption of services by the middle of 2011 to New York, Paris, London, Johannesburg, Mexico City, Cancun, Havana and Puerto Plata, as well as the launch of services to Orlando.

He says Aerolineas also plans to increase to daily its thrice weekly Rome and Barcelona services and add a second frequency to Madrid at least some days of the week. The carrier also plans to resume services to La Paz in Bolivia and Cuzco in Peru using 737-700s. The network will further be extended through new bilateral alliances.

Lafosse says the new fleet and network should help the carrier win back the passengers it lost in recent years and return to profitability. He expects Aerolineas, which earlier this year was losing $1.5 million per day, will lose a "couple of hundred million" this year but be back in the black within three years. He says revenues, which are projected to drop to only $800 million this year compared to about $1.2 billion five years ago, will also start to crawl back.

Passengers return

"Argentinean passengers prefer to fly with Aerolineas but we've had so many problems the last few years and we've lost a lot of passengers to LAN," explains Lafosse. "They're now starting to come back."

He blames Spain's Marsans Group, which owned Aerolineas until the carrier was eventually renationalised by the Argentinean government late last year, for the carrier's recent woes. "Twenty years ago Aerolineas was one of the main Latin carriers and one of the best in service," says Lafosse. "Twenty years later after three different private administrations we're flying with less planes to less destinations with an absolutely old fleet with huge operational problems.

"Now we're really working on a transformation and all our employees are working really hard to change," Lafosse adds. "We've already improved our reliability in a short time and we'll have the newest fleet in Latin America in a few years. That's a huge difference, but mainly it's a cultural difference."

Click here for more about recent trends in the Argentinean airline market