Having a flag carrier, an airline owned by the government, undeniably boosts a country's sovereignty over its national airspace, allowing the government to organise and exploit the skies however they consider it is best.
However, a flag carrier can be an overwhelming weight for a country, especially for the developing world. As the world struggles in the middle of the COVID-19 pandemic, which side of the issue wins? Is having a flag carrier a curse or a blessing in these hectic times?
A little bit of history
Aerolíneas Argentinas, Argentina’s flag carrier, was founded in 1950. At this time, the country was trying to consolidate their potential in the Latin American region. This airline was then established to hypothetically connect the country and to assert the airspace’s sovereignty. Aerolíneas Argentinas became one of the pioneering companies in the development of direct international flights.
Today, millions of Argentines and foreigners are in contact, both domestically and globally, thanks to Aerolíneas Argentinas. Moreover, the airline helps to create employment and improves communications from north to south.
While one could think having a flag carrier could harm private airlines, Argentinian law minimizes such competition. The aero-commercial transport law (19030) enforced since 1971 prohibits the national airline to sell tickets under its cost if there is another private airline flying the same route because if so, it would be considered dumping.
If competition with other carriers is not a problem, is having a flag carrier profitable?
The economics of a flag carrier
Some think a flag carrier is too costly for the benefits it provides. But this is something that Juan Domingo Perón, former president of Argentina, thought when he founded Aerolíneas Argentinas.
At the time, he said, “Jamás he pensado que se pueda mantener una actividad aérea comercial sin déficit. Todos los países del mundo lo tienen, aún fabricando sus aviones y teniendo viejas experiencias en esos servicios” (“I have never thought that it is possible to maintain commercial air activities without deficit. Every country in the world has it, even fabricating its own aeroplanes and having lots of experience in the field”).
In 2015, a study carried out by Oxford Economics investigated the economic impact of Aerolíneas Argentinas between 2012 and 2014. The results indicated an increase of GNP by 0.58% in 2014, showing a win-win for Argentina’s government.
The main difference with a private airline is the objectives of the company. As any private company, a private airline will have profit-seeking objectives, with the profits only positively impacting the cities where the company flies to or is housed.
However, a state-owned airline will not have profit-seeking objectives as its main goal. Instead, it will try to connect the whole country and fly routes that other airlines are not willing to in terms of profits to distribute the proceeds all over the national territory.
In economic terms, a flag carrier is beneficial for Argentina citizens.
The politics of a flag carrier
Ultimately, Argentina is known for politicizing almost everything, and the flag carrier is not something that stays out of touch with the changing governments.
Thus, there is a constant change in policies of how the national airspace is organized. For instance, Aerolíneas Argentinas could not be saved in the 1990s when it was privatized, or during Macri’s administration when Argentina saw how public spending was repeatedly lowered.
Macri systematically reduced subsidies granted to Aerolíneas Argentinasarguing that “Todas las líneas aéreas que funcionan acá y en la mayoría del mundo no requieren que los ciudadanos del país pongamos plata todos los meses” (“Every airline working here and in most parts of the world do not require that the country’s citizens pay every month for it”). Though, many questioned the validity of this claim since there are many governments that help the airlines established in their country by granting them subsidies, even if they are privately-owned.
Macri further complicated the national airline’s situation by calling it the “la revolución de los aviones” (“the aeroplanes revolution”). This also consisted of selling the most profitable routes to low-cost airlines, undermining the flag carrier’s ability to generate profits.
In his campaign to discredit Aerolíneas Argentinas, the former president forgot to mention how the airline boosted national and regional integration by flying to cities that no other private company flew to.
These low-cost airlines, which started to operate in the country during Macri’s government, allowed many people to fly for the first time due to the low-cost tickets.
This also created many job positions since the arrival to the country, which was something extremely demanded in a country almost monopolized by a state-owned airline. If low-cost airlines operated all around the world, the possibilities remained high for this to also happen in Argentina.
The COVID-19 era
Aerolíneas Argentinas was a blessing in the COVID-19 crisis. From the start of the pandemic, the airline worked day and night to bring back thousands of Argentines who were stranded all over the world when borders of almost every country closed.
However, it was tremendously criticized by those stranded abroad because the flights were not free when, in fact, all repatriation flights from all the countries who had them were paid by travellers since the cost of operating those flights is enormous.
The airline’s most important role was being played during the vaccination campaign. The airline was in charge of bringing millions of vaccine doses (Sputnik V; Sinopharm and Oxford AstraZeneca) to the country to continue the undergoing vaccination campaign. A campaign with no comparison in Argentina’s history. Aerolíneas Argentinas has overall brought more than fourteen million vaccine dozes in 20 completed flights.
Every flight that takes off from Ezeiza International Airport has then been received with smiles, hope, and the happiness of knowing that each day we are closer to see the end of the pandemic that has changed millions of lives, left millions of people unemployed, and impoverished many countries.
In the analysis of whether having a flag carrier is beneficial or not, there is no right or wrong. When something becomes politicized, there is always someone who is harmed by the politics of the day.
A possibility could be to find a way of balancing both the benefits of the state-owned airlines and the private low-cost ones operating over Argentina’s airspace and allowing all Argentines to connect domestically and internationally, and generating profits that can be fairly distributed considering the necessities of each Argentine province. Nevertheless, it is not expected to be on the president’s mind while the pandemic and its consequences last.