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RyanAir To Land In Argentina, Seeking To Capture Under-Served Low-Cost Market

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June 20, 2016 5:02 pm
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RyanAir To Land In Argentina, Seeking To Capture Under-Served Low-Cost Market

After roughly two decades traveling around Latin America, almost non-stop, one of many big conclusions that I’ve drawn is that the sub-continent is enormously under-served when it comes to low cost airlines. Only Brazil, with Gol Linhas Aereas Inteligentes SA (ADR) (NYSE: GOL) Azul Linhas Aéreas Brasileiras S/A, and Mexico, with Volaris – Controladora Vuela Co Avcn SA CV (ADR)

(NYSE: VLRS), Interjet and VivaAerobus, have “decent” penetration rates. In many other countries, low cost airlines are non-existent or penetration rates are negligible.

Interestingly, Argentina, South America’s second-largest economy, only trailing Brazil in terms of GDP, has a very low penetration rate, as only Gol and Chilean Sky Airline operate in the country – and are not especially popular.

However, this might change pretty soon. Talking to Spanish-language newspaper La Nación, Ryanair Holdings plc (ADR) (NASDAQ: RYAAY)’s co-founder Declan Ryan assured the Irish airline would start operating in Argentina in 2017, under the Viva brand, which already operates in Mexico and Colombia. According to anonymous sources, RyanAir will disembark in Argentina via the acquisition of Andes Líneas Aéreas.

As per the Latin news source, Irelandia Aviation said that in order to start operations, RyanAir would need to invest $50 million.

"We have started negotiating with all the countries in the region except for Brazil where there is lots of corruption," Declan Ryan added.

“As per our data, 5 to 7 percent of Argentines have ever flown. We will triple that number,” Ryan concluded, explaining that local airlines should not worry, given that RyanAir is like a “Holiday Inn Express (NYSE: IHG), rather than a Sofitel or a Four Seasons.”

 

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.


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