Monday , March 8 2021

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

The Air Traffic Manager argues that the authorities' view is not visible because they are not involved in the development of the industry. It also refers to the agreement with American Airlines and IAG.

Air travel exploded for 30 years, says Enrique Cueto, Latam Airlines's largest regional airline. According to him, the various states – Chile and the region – have not been able to hold onto the growth of the industry or to understand the paradigm shift.

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"Governments still believe that this is the industry where rich people are traveling," he says clearly at the time that air transport has been part of his work, but that competition is not only at airports but also on means of transport for access to other services.

During the debate, they made a free competition law court (TDLC), which gave them a green light to define the so-called " JBA with American Airlines and IAG, Cueto admits that it has been difficult for his partners to explain the delays they have received – as they submitted it to the National Economic Council for three years in January – and detailed instructions.

– How has the airline changed over the past 30 years?

– The tours changed. I do not know whether the governments are up to date with what the airline is today. Before the trip was something almost exclusive, it was a celebration. Today people take a machine like Uberin. There is massaging.

– What milestones is this contraction possible?

– It's a democratized industry. In the case of Chile, traffic has been reported over the past 30 years by 17. For two reasons: the levels of safety that have been impeccable over the past 20 years and the cost and price have fallen. This industry fell to a quarter of its costs for 30 years. Every time the efficiency is transferred to the consumer.

People say this has become more common because cheap airlines came … that's not true. Over the last ten years, traffic has been reported by three. Twelve years ago, we started a project that was supposed to be more efficient, and then at home, the passenger growth rate was 1% and 2% on average per year. As of 2007, our change was exceeded by 15%. So what we did not grow in the decade, we did within a year.

We know that there are things we need to improve, but others that do not change. Now we have other problems, so the airports have collapsed …

– What is the role of the sector in the current legal framework?

– There is much talk about the monopoly in this area, but whether there is a monopoly or there are one or two operators, if it is the freedom of access, it has shown that it works because prices are lower than in more developed markets such as the United States. It is the greatest success. We have an incredible growth rate that the state does not grant. The problem is that every small entrepreneur becomes very important and can be considered a monopoly.

– Have you known its weight?

– We have a self-regulation plan that comes with the action with Ladeto – which is, in the end, bad for intermediate routes and new flights. Then there is a self-regulatory plan for TAM's merger, and now, almost three years ago, we have submitted a proposal to Americans and JBA for IAG, and there is not yet a definitive resolution (now it is necessary to reach the Supreme Court). It can not be that such a business has such a delay. (See box).

– Why do you think the regulation has not kept pace?

– Aerospace also happens with technology. This has gone in the face of regulation, is happening all over the world. I IATA directory and see that today is much easier to connect people to the atmosphere than to build roads, at least in Brazil. You have to understand that this is public transport. Accessibility (which is missing) is no longer dependent on air traffic because some of the price already exists.

When I say that monopoly is not in the air, it is because tariffs have fallen: a monopoly is on earth.

– In what sense is it said?

– I mean the airports or their owners, that is governments and cities who look at the terminals as a way to earn income. Governments still believe that this is an industry where rich people travel. After all, they say "I'm going to charge for this flight.

Who gives me a bigger share of the money the airport collects … that one wins the bidding, not the one with better service and the one who pays the cheapest. Then taxis etc. Offered Finally the airport is more expensive than traveling. Parking is expensive. They do not want Uber's arrival because the company is lost.

What should be done? Metro to the airport, cheap that airlines are killed for cheaper prices, but also the airport to kill them.

Industry has moved much faster than the authorities and the political world. I think it is excellent that this government has lowered domestic boarding because it reduces the cost of the trip.

– It has been standard for many governments …

– We are fighting because the technology of the new airport was defined 10 years ago. For example, logging in is to be done in three steps when in the world today is done with one. This is not a criticism of political color, but this industry is going at a speed that can not be achieved by the authorities. We have been successful in utilizing traffic, but that does not mean just importing airplanes. It needs to have infrastructure and administration needs to improve airport management.

– This lack of infrastructure, what problems does it bring to you?

– The first thing is that the passenger suffers. Today here in the summer is huge. You have to dodge buses, the service can not be controlled. When a foreigner arrives, I am shameful of what he sees, the smell that exists in the field … this airport does not reflect what the country has been.


– For the business itself. During these three decades, what do you think of Lan's turning point?

– This company has turning points every five years. In 2000, Lan did it well … but to continue growing at the most open on the New York Stock Exchange, which required two things: margins and growth. The first thing we gave, the other was not. Then we created Lan Peru.

Then in 2005 traffic began to increase in the region and low costs began. We became effective and we came up with a dream of creating lathe.

This is one of the logic: South America is 6% of world traffic, Europe 22% and has three major airlines. The United States is 30% and has three companies and a few girls. We did not have anything at all. Half of that 6% was Brazil.

But also where we stand, we do not have traffic where food.

South America was a very large area, with poor and low traffic. How can I compete with other people with greater traffic? When we united with Tami, the first thing that was done was to cut all Rio operations and start linking 6% to Sao Paulo. Latam is a fort.

If we want to be a global operator, we had to join all of South America with Brazil and to strengthen all aspects of development.

– Although the merger has incurred costs …

– Since the contract was closed, which lasted two years, there was no good financial performance in the area, then everyone began to blame Latamia.

– And who the fault is it?

– We have done thousands of mistakes, but it is part of this process. Brazil dropped eight per cent to 8 per cent growth. When they ask us, we will do repentance, we say that when such an opportunity is given, it is taken or not.

Brazil before the merger was the largest market in the region and grew well and in good currency. The costs after the merger doubled. In addition, the land began to decline. He did not cut us because we had other companies.

– What is a merger evaluation today?

– We can do what we do, how to invest, combine and debit, is undoubtedly a positive one.

– But they still have very unstable results …

– Yes, we are not happy with it. When the earth crashes, there is not much to do. The main problems have been economic.

– Are investors pressed them?

– We came from a New York meeting with investors. We told them that the reasons for the complex figures in the second half of the year are the growth of oil and impairment in Argentina. We know the measures we use, and they tell us that even with these problems the company is much more indebted than before. They also understand that we are much more competitive. Results must be improved in the short term, but we are in an area where nobody would have expected this shock.

– How can you grow in such a complex area?

– We're in Latin America and here we are. That's why companies such as Qatar are betting that this area is important. Aerospace is like telecommunications, someone has to join here. The fact of many countries also helps because there has never been a problem in the whole region unanimously.

– Today you see two realities: mega-airlines and regional ones, how are you, how has the tension lived?

– Definition in some points is related to geography and other ways to compete. Large middle-carriers who are medieval whenever they make direct flights make Europeans and Americans suffer. In this area we compete with those who come and our job is to unite them.

-What do you compete at low cost?

– There are companies that decide to create low cost in a traditional airline. We do not have three flights as we do and five low fare flights, rather we offer eight flights per day when the passenger chooses or segmentes. It is this industry that is going, though there may be markets where we may have to open low cost if that does not work.

– The idea of ​​creating low cost is not a solid project?

– We have several airlines in several markets. If costs are close to low cost, we do not need to change, but if there are markets that do not solve the problem and I have inefficient high production costs, I have to create a business because if I do not disappear.

– Definition when it could be implemented?

– We see in every market.

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"It is regrettable that without foundation they will be lured
Agreements approved by the Authority "

– How do you see a TDLC resolution on JBA?
– TDLC issued a technical resolution on the positive effects of commercial agreements between airlines on passenger ships. As stated in the resolution, this is a network sector and the agreements make it possible to increase significantly more efficiency, increase conversion to more flight equipment, more stops, better connections and lower prices. However, the judgment also has extremely difficult mitigation measures and we will continue to analyze all its effects.
– Considering that Achet has already announced that it will go to Supreme Court, how are you preparing?
– We can not tell what we are doing. We will continue to evaluate.
– How do you see the role Achet has taken on this?
– Achet, who calls this commercial alliance as a "cartel", the communication reaction is completely unaware of how the airline works or responds to desperate efforts to draw attention to the interests of trade unions from the country's interests. It is regrettable that without the Constitution the aim is to prevent the progress of the agreements approved by the technical qualification authority.
JBAs are a global trend and cover a good part of long journeys. They reach over a third of the long-haul flights in the world and the United States to 60% of international passengers. In addition, all major airlines in our region are working on such contracts that, according to the Court of Auditors, have been able to reduce costs, lower prices and provide better connections. Chile can not be left out of this development.
– How do you explain to our partners the delay in the process?
– TDLC's resolution was about two and a half years after consultation and the process could continue in the Supreme Court. It is difficult to explain the alien delay, possibly reaching four years for approval, in a world where speed is critical to business.

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The beginning of change

Today, Latam Airlines has 300 operations, operating around 67 million passengers per year and employs some 43,000 people in the area.
In February 1989, when the change of the then Lan started, a public company whose government decided to privatize 51 percent, leaving it in the hands of national investors and the Scandinavian Airlines System.
The transition lasted until 1994 when the privatization was completed and 98.7 percent of the airline took over by current supervisors and other shareholders.
That is why the story is known: the company has grown to be the most important regional player, especially after the Tam Fusion in Brazil.

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