In a move to further concentrate on its core business in Europe and North America and improve profitability, Norwegian announced on December 4 that it will sell Norwegian Air Argentina (NAA) to ultra-low-cost airline JetSMART. This concludes the Argentinian adventure that has lasted just over a year.
Norwegian announced in 2017 it planned to enter the Argentinian market which it saw as underserved and promising because it was dominated by legacy carriers that asked high fares. A low-cost airline Norwegian-style would make sense, so the airline requested a separate AOC for Norwegian Air Argentina. This was granted in January 2018 but the first services only commenced on October 16 that year.
NAA’s network has grown to eight routes out of Buenos Aires to Bariloche, Córdoba, Iguazú, Jujuy, Mendoza, Neuquén, Salta, and Ushuaia. These were operated by eventually three Boeing 737-800s. The airline employed 180 staff.
According to figures provided by NAA, in its first year until December 4, it has carried 982,000 passengers. In its 2018 annual report, Norwegian said NAA had captured a five percent market share in the first 2,5 months and revenues of NOK 276,4 million. NAA was expected to be profitable in 2019.
Q1 2019 has seen strong growth in both passengers and revenues to NOK 212,9 million, but in Q2 this was already much lower to NOK 181,4 million. Q3 saw an improvement again to NOK 229 million but Argentina continues to be a difficult market due to the weak economy and high inflation. The sharp depreciation of the Argentinian peso versus the US dollar has created a significant gap between costs and revenues, Norwegian’s CEO Geir Karlson explained.
No details are available for the current Q4 but in its quest for more profitability and lower growth, Norwegian has now decided to discontinue NAA’s operations. All shares have been sold to JetSMART for an undisclosed figure, with the South American low-cost taking over NAA’s network with immediate effect. As an all-Airbus A320-operator and 56 A320neo’s plus 26 A321neo’s on order as part of the 430 aircraft mega-deal announced at the 2017 Dubai Air Show by parent Indigo Partners, JetSMART will phase out NAA’s Boeings within the next six months. Most staff will move to JetSMART except those working for NAA at a call center, who will assist with customer affairs for Norwegian Air UK’s London-Buenos Aires route.
Indigo Partners ordered 430 A320neo-family aircraft for JetSMART, WIZZ, Frontier, and Volaris at the 2017 Dubai Air Show. (Airbus)
JetSMART operates in Chile, Peru, Colombia, and Argentina and has seen impressive growth in recent years. CEO Estuardo Ortiz explained in Dubai 2017 that his airline needs additional aircraft as air traffic is rapidly replacing the traditional bus networks as the favorite way of transportation in Peru and Chile. JetSMART doesn’t publish investor’s information, so the extent of the growth and the impact of the recent social unrest in specifically Chile can’t be checked.