Saturday , September 24 2022

Enrique Cueto says the monopoly is not in the air, but on land.


Airline chief executives argue that there is no vision for the authorities that did not accompany industry development. It also mentions the recent approval of the contract with American Airlines and IAG.

Enrique Cueto, chief executive of Latam Airlines, the largest regional airline, says air traffic has exploded in 30 years. Chile and other governments in the region have not been able to keep up with industry growth or understand paradigm shifts, he said.

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"The government still thinks it is a wealthy travel industry," he says, explaining that the airline industry has done the job. He says violently, but lacks competition on the ground as well as at the airport. It's possible.

During the analysis, they are adjudicated by the Free Competition Prevention Tribunal (TDLC), which has provided green traffic light that stipulates American Airlines and IAG and the so-called JBA. Cueto admits that it was difficult for partners to explain the delay. The researchers who followed the process detailed the next steps since submitting to the National Prosecutor 's Office for three years in January.

– How has the aviation industry changed over the last 30 years?

– Your trip has changed. I do not know if the government has up-to-date information on what the aviation industry is today. Before almost an exclusive trip, it was a party. Today, people fly the same plane as Uber. There is massification.

– What is the milestone for this overcrowding?

– Democratized industry. In Chile, traffic has increased 17 times over the past 30 years. There are two reasons why the level of safety over the last 20 years has been impractical and the cost and freight rates have fallen. The industry has fallen to a quarter of its cost in 30 years. Whenever there is efficiency it is delivered to the consumer.

People say it has become widespread because low-cost airlines have entered. It is not true. Over the past decade, traffic has tripled. Twelve years ago, we started a project to make it more efficient, and passenger growth at domestic levels was 1% and 2% per year on average. Along with that change, as of 2007, we have passed a rate of 15%. In other words, it was a year when we did not grow in 10 years.

We know we need to improve, but we will not change. Now we have another problem with the airport collapsing …

– What role does the current legal structure play in the growth of the industry?

– There is a lot of talk about monopoly in this industry, but if there is freedom of entry, whether monopoly or one or two carriers, it is the greatest success in advanced markets like the United States. We have seen remarkable growth rates without subsidies in the country. The problem is that a little growing company can be regarded as a super-related and monopoly.

– Did you feel that weight?

– We have a self-regulatory scheme that works with Ladeco. Eventually it has a negative effect on the intermediate path and the new path. Then, there is a self-regulatory plan for the merger of Tom, and almost three years ago we proposed a proposal for the United States, IAG and the JBA, and there is no decision yet (now we need to go to the Supreme Court). There can be no such delay in this type of business. (See box).

– Why do you think regulation has failed to keep pace with development?

– What happened with technology happened in airline. This happens all over the world ahead of regulation. I am in the IATA directory and it is much easier to connect people to the air than to build roads in Brazil and elsewhere. You must understand that this is public transport. Accessibility (the missing part) is no longer dependent on air transportation because it is already part of the fare.

When we say that the monopoly is not in the air, it means that the monopoly is on the ground because the tariff is falling.

– In what sense?

In other words, the airport or its owner, the government, the city or the terminal, is seen as a means of earning income. The government still thinks this is an industry where the rich are traveling. In the end they will have to pay this fare.

The airport has a higher percentage of the money it collects. Who does not charge the lowest price, not better service. Then a taxi is provided. Finally, going to the airport is more expensive than traveling. Parking is expensive. Uber does not want to get lost in business.

What should I do? The airline to the airport is killed by the cheap air fare, but the airport also dies at the airport.

The industry moved much faster than the authorities and the political world. I think it is excellent that this government started to lower the domestic boarding rate. Because it lowers travel costs.

– It is constantly …

– We are fighting because the technology of this new airport was defined 10 years ago. For example, check-in should be done in three steps. Today, the world is a single step. This is not a critique of political color, but the industry is proceeding at a rate that is impossible to achieve for the authorities. We were able to take advantage of the traffic, but we were not just bringing the plane. The government must have infrastructure and improve airport management.

– This infrastructure deficit, what problems bring to you?

– The first is what passengers are going through. Today, going through summer here is enormous. You must be able to avoid the bus, the service is difficult to manage. When foreigners arrive, they are ashamed of what he saw, the smell of the sector … This airport does not reflect the country.


– about the business itself. What do you think is the turning point for Lan in these 30 years?

– The company has a turning point every five years. In 2000, Lan worked very well … but he has opened himself up to the New York Stock Exchange, which requires both margins and growth to continue growing. It was not the second time that we gave it for the first time. Then I made Lan Peru.

Then in 2005 traffic began to increase in the region and low cost started. We have become efficient and we have a dream to create Latam.

It has one logic: South America has 6% of the world's transport, 22% in Europe and there are three large airlines. The United States has 30%, three companies and a few girls. What we have, we have nothing on the world stage. Half of those 6% were Brazil.

But where we stand, we do not have where to go.

South America was a very vast area, poor and with little traffic. How do you compete with people with more traffic? The first thing we did when we joined Tom was to cut all the work in Rio and connect 6% in Sao Paulo. There is Fortress of Latam.

To become a global operator, we had to join Brazil and strengthen all development points throughout Latin America.

– The merger cost money, but …

– It took me two years to finish the settlement, but the area did not get good economic results and everyone starts to blame Latam.

– Who's wrong?

– We have made thousands of mistakes, but are part of this process. We have Brazil, where Brazil's growth rate has fallen 8% for two years. When they ask us if they repent, we say that if such an opportunity is given, it is accepted or not.

Before the merger, Brazil was the largest market in the region and grew well in good currency. The cost after the merger has doubled. Also, the country began to decline. He did not hurt us because we did another business.

– What is your assessment of the current merger?

– It is certainly positive that we can do what we are doing, how we invest in and connect to the region and lower our debt.

– However they will continue as a result of very volatile …

– That's right. We are not satisfied with it. If the country collapses, there is not much to do. The main problem was economic.

– Investors are going to push?

– We met in New York with investors. We say the reason for the complex number of the second quarter is the increase in crude oil and depreciation in Argentina. We are aware of the actions we are taking, and with these issues, we are seeing even more deleveraging than before. They also realize that we are much more competitive. Although there is a need to improve results in the short term, we are in an area where no one would expect this shock.

– How can you grow in complex areas?

– We are in Latin America and here. This is why companies such as Qatar are announcing the importance of the region. Airlines are like communications. Someone needs to connect here. The fact that you are in multiple locations is helpful because the whole area is no problem in harmony.

– Today you can see two realities: Mega Airlines and local people like you, how did the tension live?

– In what ways does the definition relate to geography? Large medium-sized aircraft, a large Middle Eastern company, harass Europeans and Americans every time they open direct flights. In this area, we compete with those who come and our mission is to connect them.

– How do I compete at a lower cost?

– There are companies that have decided to develop at a low cost within a traditional airline. We prefer to offer eight flights a day instead of three flights and five cheap flights. Passengers are selected, or segregated. That is what the industry is trying to do. If this does not work, there may be a market that we have to open at a low cost.

– The idea of ​​low cost is not a company project.

– There are several airlines in different markets. You can have a cost-effective approach, but you do not need to change it, but if you have a problem with the inefficient product market that does not solve the problem, you should create a company if it does not go away.

– When that definition can be taken?

– We are looking at each market.

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"It is unfortunate that if you do not have a foundation, you fall into a bog.
Convention approved by the Authority "

– How do you see the TDLC resolution on the JBA?
– TDLC has issued a technical resolution on the positive implication that commercial contracts between airlines are created for passengers. As stated in the resolution, this is a network industry, and through contracts, you can create significant efficiencies and translate more flight options, more direct destinations, better connectivity and lower prices. However, the ruling also has very difficult mitigation measures and we are still analyzing all the implications.
– How do you prepare, considering that Achet already announced that he will go to the Supreme Court? Will you charge me?
– We are not in a position to disclose what we do. We continue to evaluate.
– How do you see Achet's role in this role?
– Achet's communication response to the "cartel" commercial alliance is entirely ignorant of how the aviation industry works or responds to desperate efforts to turn union interest in the national union into the interests of the trade union. It is regrettable that it interferes with the proceedings of the Convention authorized by the Technical Authority without the Foundation.
The JBA is a global trend and is a good part of long-distance travel. More than one-third of long-haul flights in the world reach the US and 60% of international passengers. In addition, every major airline in our region is seeking agreement on this nature to reduce costs, lower freight rates and improve connectivity in accordance with court rulings. Chile can not escape from this trend.
– How do you explain the process delay to your partner?
– The resolution of the TDLC can continue in the Supreme Court about two years after the consultation. It is difficult to explain to foreigners that speed is likely to take four years to get approval in a world that is crucial for the business.

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The beginning of transformation of Lan

Currently, Latam Airlines has 300 operating aircraft, transports approximately 67 million passengers per year and employs approximately 43,000 people in the region.
Lan's transformation began in February 1989, when the government decided to privatize 51% of the time, and it was a public company that was put in the hands of national investors and Scandinavian air systems.
This transition continued until privatization in 1994 and current regulators and other shareholders accounted for 98.7% of the airline.
So the story is known. Especially after the merger with Tam (Brazil), the company became the most important regional actor.

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