By way of example, as at 7 November 2006, the online price quoted by Aerolíneas Argentinas for a return economy fare from Buenos Aires to popular Patagonia destination El Calafate was US$230. Unless you're a foreigner.  In which case, the fare is US$566.  Foreign travellers are paying nearly two and a half times the going rate for locals.

And the odds of being able to beat this system are slim indeed.  Any attempt to book as an Argentine resident is likely to come a cropper at check-in, when you are asked for your identification documents.  You will likely be given the option of paying the fare difference on the spot, or being denied boarding.  About the best thing that can be said of this situation is that, but for the outcry from the tourism industry, it could have been a lot worse.

Questions such as “how can they get away with this?” can be answered in just three words:  because they can.  Aerolíneas Argentinas controls more than 80% of the domestic market, and on many routes important to the tourism industry, is the only carrier.  This boosts the airline beyond mere 'market dominance' and into an effective monopoly position.  And that means they can literally charge what they like.  But only to foreigners.

Under Argentine law, the government sets fares bands for the local airline industry.  During the crisis of September 2002, the government declared a state of emergency and froze prices.  Aerolíneas' Spanish owners Grupo Marsans had been pushing the Argentine Government to approve fare rises ever since.

“Currently we’re stuck with 2002 revenues but with 2006 costs,” then airline president Antonio Mata argued in June, a few days before being sacked.  A tense period passed between both parties, exacerbated by industrial unrest and a threat by the government to take the airline back under State control.  Finally a deal was signed.  The strikes were quelled with pay rises of around 19% and the government increased its shareholding by between 5 and 20%.

But as this good news was announced, it became clear there was a sting in the tail.  As part of the deal, the Government had authorised Aerolíneas to raise domestic airfares by 20%.  But for tourists, the rises weren't the 20%.  Overnight, and completely without warning, fares for foreigners almost tripled.

The fact that Aerolíneas charges higher fares to its foreign customers is not new.  To be fair, standard practice for airlines around the world is to sell seats at a range of different prices, from full fare down to a handful of heavily discounted fares designed to allow airlines to advertise low prices in their promotional material, and to encourage early bookings.  But lifting the differential from about 30% to nearly 150% more than residents pay, was, according to Pablo Haas, “disproportionate, unjustified, arbitrary, and senseless.”
 

According to Pablo Haas, the sharp rise in fares had an immediate and ongoing impact on the Argentine tourism industry.  Initially with a raft of cancellations when agencies and foreign travellers alike were stunned to find, on August 9th 2006, that fares had not risen the 20% announced, but 170%.  Small wonder then that Jorge Andía felt moved to lead a revolt of outraged Buenos Aires travel agents.

“Speaking daily with tour operators and accommodation providers at various destinations, they have all noticed a reduction in travellers since the fare rises,” Pablo Haas says, “and everybody in the sector is angry.”

But the long term impact on tourism is difficult to judge just yet.  Tourist numbers overall show a record number of arrivals.  It may be the Argentine provinces that suffer most.  Pablo Haas says tourists seem to be spending longer in Buenos Aires, or within a manageable bus ride of the capital, than a few months ago.

But, none of this is any skin off Aerolíneas's nose.  As Pablo Haas points out, the planes are full, and competition for seats is tough – the airlines don't have the capacity to satisfy the market as it is.  So it looks like a case of supply and demand, with a side order of market dominance.  “In the end,” he says, echoing the industry's air of resignation, “there are people who will pay these prices."

Come Back Southern Winds-All is forgiven
In September 2004 Spanish police found 60 kilos of cocaine in Madrid airport.  The illicit cargo was found in a suitcase marked “for the Argentine Embassy in Spain”.  A Southern Winds employee was the chief suspect (as well as the whole Argentine military and airport security apparathus), yet it was the airline that paid the price and the popular Argentine company filed for bankruptcy when the government decided to withdraw its subsidies.

More's the pity as Southern Winds possessed 50% of the the market and injected a healthy dose of competition into the business.  It was an efficient and cost friendly alternative to Aerolineas Argentinas and its demise is the main reason why the airline industry here is now a monopoly.  The company also routed many flights through other cities besides Buenos Aires (primarily Cordoba).  It’s a ridiculous situation that travelers who wish to fly between Andean destinations Bariloche, Mendoza and Salta must do so through Buenos Aires.  To paraphrase a well known Argentine saying: “God goes everywhere but he flies through Buenos Aires.”