Q-1: Mr. Maggio just yesterday you were applying together with four other domestic airlines for the authorization to cover routes to the United States, Europe and the rest of Latin America. Can you provide our readers with more details?
A-1: Well we believe that we are the only airline that really is interested to cover with daily flights all the most important destinations in the United States and Europe. We have spoken with the other companies that have the possible routes and some of them are planning to fly charter flights and the other ones are requesting the routes just for the purpose of having the authorization. And we really believe we are the only ones who have the vocation to get the necessary equipment in order have a huge international network. The same that Aerolineas Argentina had in the past. Southern Winds right now is the only airline in Argentina that has more flights. We have more than 120 flights a day, even more flights than Aerolineas and Austral together. That is not very well known by the public but actually that is what we have right now.
We have a feed from the interior of Argentina from the capitals and main provinces. We have a base in the Cordoba airport and in the Buenos Aires airport in order to be able to fly international for the passengers of Buenos Aires and Cordoba. Miami, New York, Los Angeles, Paris, and Rome are destinations that we have requested. Southern Winds has had for the third consecutive year the Best Airline Award by the Global Research service in Argentina.
Q-2: During an interview with the president of Lapa, he did not seem to show very much interest in expanding the routes to Europe and his comment was that it is simply too expensive for Lapa to compete against the big players on the market. How confident are you about the chances of SW?
A-2: We will be able to compete for two different reasons. The first is that Southern Winds has a different strategy. 95% of our traffic is business passengers so we provide a service, which is much better than any other service of the same type in the World. For example in the domestic area we do not fly with used 737's, but we do it with regional jets. The regional jet is an airplane, which has been sold for three years. I mean for three years if you go to buy one of those airplanes you don't get one for less than three years. It is a new concept, it is a very modern airplane, it's a bombardier, and that is used by the most successful airlines in the world, Lufthansa, Delta, Air France, United, everybody. They are switching to these regional jets and airplanes. And it is an airplane that is very fast, very comfortable, although it is smaller, it is bigger and the people fly faster and more comfortable. And in order to board the airplane and get of the airplane it is quicker. The airplane is never crowded. The feedback of the passengers after flying the regional jet is of a new concept, it is something new. With this airplane, as it has less capacity of seats, you are able to fly point to point services and we don't have to go through big hubs in connections. We already have business passengers who would be willing to fly in Southern Winds airplanes if we had the international flight. The same people are asking us to make flights. The other reason is that we have already access to the market venture capital in order to make this expansion, although I cannot give you more details about it. The Southern Winds good image and the operating records has helped to convince many investors around the world to support our operation in a vast range from leasing companies to capitalists to private investors. They are willing to support Southern Winds to expand internationally. And so we have done a recent capitalization in the airline and we have the money in order to make this expansion. We do not believe that we are going to use even all of the money. I think that Argentina needs another modern representative in the airline transport industry. Although Southern Winds is an English name we are an Argentine company, we would like to carry the flag of Argentina to every part of the world with our airline.
Q-3: In order to continue your expansion strategy you will have to expand your number of airplanes.
A-3: We have already signed these contracts for airplanes with different options that we are going to exercise as soon as the routes are awarded. We have signed contracts with leasing companies and have several options for airplanes and we believe we will have the ability to switch from one airplane to the others depending on the capacity, frequencies and routes that the government is going to award. Whether we go for a 767 or a 777 will depend on the amount of frequencies, but we have already done that, we are already committed to the airplanes.
Q-4: You seem to be more optimistic than the other national carriers.?
A-4: I never like to be more optimistic than what I should. Our policy has never been to announce our plans before we did them. We never announced the purchase of the first 12 airplanes, but the same day that an airplane arrived in Argentina we announced that we had a newer plane. The big companies have their pros and cons. The airlines in the US have a huge distribution network but on the other hand small is beautiful”. After all, the big four airlines in the United Sates are not the only ones that exist around the world. So there has to be a way to compete with them. If you ask someone in the street about American Airlines and about Southern Winds you are not going to find from an image point of view a big difference. The people also count on us to be a high tech airline. We have bombardier's support. Bombardier is a 70,000-employee company and has specially supported us.
Q-5: What is your assessment on the planned open skies agreement with the US?
A-5: We don't want to give our opinion on whether it should be open skies or not because that has to do with a lot of things that we believe that the authorities in the United states and Argentina have more experience in dealing with in order to know if they have to go one way or another, things that have to do with countries policy, economic growth. What I can tell you is that we always are going to compete. We will have big competitors and so we started with the best airplanes, the best people and we try to do the best to compete always. And so if the skies are closed and we are inside, better for us, if not, we would like to compete.
Q-6: What do you expect for this year in terms of sales, profitability and market share?
A-6: About Southern Winds, our next balance, our next financial statement will show sales for more than 100 million. All the profitability we have this year will be used to keep growing and we have been profitable in all our balance sheets since we started out in 1996. We have 750 employees. We have 13% of the market, we have a 99% in the interior from province to province and we have 7% in Buenos Aires. The total in kilometers is 13%; if you count it in passenger kilometers it is 17%. If you count it in passengers we are a little bit more. If you count in amount of flights we may have a full 40% for all flights in Argentina. We have smaller airplanes that is why we have less passengers and less passenger kilometers and also our average trip length is shorter because we have more passengers on shorter trip lengths. Each airline uses whatever is more convenient to advertise for them to say they are the best. Our yield, our income per seat mile is the highest one. That is really the most genuine benchmark because it is the way you are able are able to carry the high yield passengers and fill seats.
Q-7: SW was introducing a new regional concept, by being the only one offering direct flights between national destinations. Would you say today, this was a successful coup?
A-7: Yes the regional jet is very successful because of what I told you about the advantages that the airplane has from a passenger point of view. The passenger appeal for the airplane is known worldwide. It has less noise, seats are more comfortable and the passengers board the airplane faster and get out of the airplane faster so those are the advantages of flying the regional jets with the same capacity measured in the market share in the amount of seats you can have more frequencies than your competitors. | Q-8: Your home base is in Cordoba. Are you satisfied with the support you receive from the Cordoba government?
A-8: We are happy with the Cordoba government. We are happy with them because we believe that this is a good government for Cordoba. And I never asked the government for anything. We never asked any governor or president for any kind of support. I cannot tell you if they did something for us or not because we never asked. In other places in Europe and in the United States, many airlines get started with subsidies or loans or guarantees by the government. In our case I never asked them for that because I knew that it was not possible. The regional governments were not going through good times and I believed that it was not good for us to be asking for subsidies. We are asking now to see if the airports will help us with some tax decreases to prevent the passengers from paying those taxes. But we are not asking for us, we are asking the government to see if they could wave the passengers from paying the taxes.
Q-9: As a matter of fact domestic flights in Argentina continue to be very expensive. For instance a flight from Buenos Aires to Ushuaia is almost as expensive as a flight from Buenos Aires to New York.
A-9: There is some confusion there. Everyone believes that the ticket from Buenos Aires to Ushuaia in Argentina is expensive. In Argentina, the yield per passenger kilometer is the lowest in the World. There is no country in the World with lower yields than in Argentina. The yield in Argentina I think is 9 cents per kilometer. If you go to the United States the yields go above 13 cents. If you go to Brazil they are higher. Europe is above 40 or 50 cents per kilometer. A domestic trip cannot be compared to an international trip because there is a principle of economy of air transportation. The longer the flight, the cost per seat is reduced by ten times. If you fly with a 747 to New York or a 767 to New York, with 400 passengers the cost of each seat is 1,000. If you fly with a 747 from Buenos Aires to Ushuaia and you carry 80 or 90 passengers, the cost of that seat is at least 300$. If you go round trip the cost is 600$, then if you take the 1,000$ cost of the flight to New York and you subsidize it by the business class fares which are 4,000$, you can get down to 600$, same as it costs to go to Ushuaia. But the same thing happens in the United States. If you take a flight from Miami to London, you're going to be paying 500 dollars round trip and if you fly from Dallas to New Orleans or Miami you pay 1,000 dollars. I paid 900 dollars to fly from Los Gatos to Los Angeles round trip. What can we do about this is a question that I have been asking myself for five years to make people understand how transportation works. And it is even worse when there are only 20 passengers. The cost of each seat carrying 20 passengers is four times higher than the cost on a smaller airplane than the cost of going to Ushuaia on a 100 seater. People coming from the United States are amazed that they can get tickets to Cordoba for 49$. The other day I saw someone from a leasing company in the US. He paid 69$ for a ticket to Cordoba and he couldn't believe it. If you take Southwest in the US--I took them to go from Fort Lauderdale to New Orleans--the lowest fare is 170$ and it is a flight of 1 hour 15 minute. It is the same distance as from Buenos Aires to Cordoba. Buenos Aires - Cordoba's highest fare is 130$. Can you imagine that Argentinean airlines are suffering because the people are not willing to pay more, they do not have the same capital as in the United States. They are not paid well enough here to pay the kinds of fares that people pay in the United States. You can also see that in the profitability of the regional airlines in the United States. A man named Parker wrote a book and suggested to people to buy stock in the airline business. That is incredible because the airline business has always been a marginal business. It's not a business where people have been able to make a lot of money.
Q-10: SW is offering several tourist packages, called Patagonia de Gran Clase”. Who are your main partners within this project?
A-10: We have to ask that question to the marketing director or the General manager. I know that we are flying to Calafate, to Ushuaia, from the Interior in Cordoba and Mendoza. In the North we are flying to Bariloche, to the Andes and this is a huge contribution to the country because all those are cities where people from abroad like to go. San Martin in the Andes where you can find big mansions of millionaires from the United States and Europe. I went for a couple of days to San Martin and I saw Ted Turner putting on his skis. Many well-known people from all over the World are choosing our cities for vacation. I am doing a huge contribution by doing flights that still are not as profitable as maybe we would like them to be. We are also offering chartered flights to Brazil and to Peru. That is also working very well.
Q-11: Would you tell our readers what is the role of Eduardo Eurnekian, president of Aeropuertos Argentina 2000, within SW?
A-11: Well, we are negotiating his participation in the company and we are in the final stages of these negotiations. He has chosen to invest in Southern Winds because he believes that it is the best airline in Argentina. He is also a billionaire and in the conversations that I have had with him I think that he got into the airport business because he believes that Argentina's main growth will be based on tourism. That means that he thinks that Argentina is a very beautiful country and that it can grow very much. I like his philosophy because someone who is putting so much money into the country with the small inconvenience that we have been going through in the past years, for me this is something very important.
Q-12: What would be your final message to our readers about Southern Winds and Argentina in general?
A-12: Since we started Southern Winds we believe that Argentine people need to find a place in the World and need to be known for doing something well, not just be known for steak and tango. I would like the Argentinean people to be known in the same way as people from Switzerland are known for manufacturing watches, or Canada known for airplanes. We would like the Argentinean people to be known for building good airlines. Aerolineas was known in the past as being a very good airline. We would like to get to that same level and be known as a high tech excellent service airline. We would like to go worldwide and expand in the future. That is my best wish for us. I find that Argentina has people and employees that are willing to make something more. For a long time Argentina was sleeping and these people didn't have the opportunity to work on important projects. The main asset of Southern Winds is the people. Not only from the mechanics, the flight attendants, they have created an attitude towards passengers that I did not plan on. In the beginning I planned on an economic equation, on the best airplanes, the best advertising, and I also planned on motivating my people--but I didn't need to do that. The people showed something to me. That is always seen by people coming abroad to visit our company. They find a team that is strong and willing to work that’s the conclusion of their reports. The conclusions are that it is a highly motivated team. We need to give them our support and provide them with airplanes and with capital. My message is that whether Argentina is going to be very well or only well, we from Southern Winds will try to give an example and work very hard and create the best airline hopefully in the World, if not in the World, than at least in Argentina.
NOTE: World Investment News Ltd cannot be held responsible for the content of unedited transcriptions. |
