Pluna, the national airline of Uruguay, announced earlier this month that it will use new aircraft delivered from Bombardier this year to serve new destinations in Brazil and Chile. The carrier has 3 new Bombardier CRJ900 aircraft scheduled to be delivered by the end of 2011. These aircraft were ordered in early-2011 along with 2 additional purchase options.
The carrier, which currently operates 10 of the 90-seat CRJ900s, has set an ambitious growth target of more than 25%, aiming to raise revenues from $75 million in the first half of 2011 to $100 million in the first half of 2012. The carrier reported an annual loss of $17 million in 2010, and anticipates a narrowing of that figure to $10 million in 2011, in spite of higher fuel prices.
Pluna plans to use the aircraft to expand its destination portfolio in Chile and Brazil. By mid to late 2012, the airline indicated that 2 new destinations apiece would be added for those two countries. Earlier in 2011, the carrier mentioned in its in-flight magazine that some of the Brazilian destinations being considered included Londrina, Maringá, Campo Grande, Vitoria and Goiania.
Image courtesy of Globespotter
Pluna has expanded almost continuously in the past year. In October 2010, the carrier added a second daily flight on the Montevideo-Rio de Janeiro route, up-gauged frequencies to daily on routes to Curitiba, Porto Alegre, and Cordoba, and added a third weekly frequency to Foz do Iguaçu. In November, the carrier added three daily flights to Santiago de Chile. Throughout the rest of 2010 and early 2010, the carrier expanded further with 6 weekly flights to Campinas, up-gauges to double daily to Buenos Aires Ezeiza, 4 weekly flights to Belo Horizonte, and 5 weekly flights to Brasilia. All told, the carrier now operates to 9 regional destinations in Brazil, up from 7 in July of 2010, and 15 destinations as a whole, with all destinations served from Montevideo except Punta del Este which is currently served from Buenos Aires (in addition to Santiago-Florianopolis).
Pluna and Montevideo’s Carrasco Airport have grown in tandem in the past few years. Since hitting a trough of 830,000 passengers in 2003, Carrasco Airport has more than doubled in passenger traffic to 2 million in 2010. The 2011 figures show a 32.8% increase in passenger traffic in the first two months of the year over the prior year period. Carrasco Airport opened a new terminal in 2009 that has won numerous architectural awards. The airport currently has the capacity to handle 3.5 million passengers annually, though it can be expanded further.
Pluna, meanwhile, has successfully restructured itself since hitting a low point in 2007. The Uruguayan national carrier, which has been in operation since 1936, in 2005 found itself being dragged down with its key investor Varig which was in its final days before being acquired by Brazilian low-cost carrier (LCC) Gol in 2007. The government took a majority stake in the carrier in 2006, which was sold in 2007 to a consortium of buyers known as Leadgate Investment that paid $175 million for a 75% stake in the carrier. In October of that year, Pluna launched a new brand image and ordered 7 CRJ900s in a total revamp of the fleet. Unprofitable long-haul flying was cut and Pluna began to focus on regional air services.
Today, Pluna has aligned itself not only as the primary carrier serving Uruguay’s origin and destination (O&D) markets, but as a powerful regional purveyor of connecting traffic. Connections represent about a third of Pluna’s total passenger count, and the carrier has built a good business model of connecting passengers from regional destinations in Chile and Argentina to Brazil. Many of its Brazilian destinations especially, see little to no international service from Brazil’s native carriers and many prefer to connect via Montevideo, rather than backtracking to Rio de Janeiro or Sao Paulo on TAM, Gol, and the like.
Note: TACA Peru figures are missing; carrier had a sub 3% market share in 2010
Pluna is also successful in attracting passengers at Buenos Aires travelling to Chile and Brazil. Pluna was one of few carriers allowed to operate international flights out of Jorge Newbery Airpark as Montevideo is such a short flight, which is closer to Buenos Aires’ city centre than the international airport Ezeiza. Many business travellers prefer to travel out of the more convenient Aeroparque, and Pluna was able to do good business connecting these passengers to regional destinations.
However, in 2010, Aerolineas Argentinas shifted much of its regional international network to Aeroparque, thereby cutting off some of Pluna’s growth potential at the airport. Aerolineas Argentinas now operates service to 9 regional destinations, replicating much of Pluna’s network. Further competition comes from LAN/TAM; with service to 5 destinations and Gol with service to 2 Brazilian destinations.
In addition to the new competition at Aeroparque, Pluna also has to deal with an un-cooperative Argentinean government. In an interview with Reuters that was quoted by a Spanish language newspaper, Pluna president Matthew Campiani said, “From the Argentine side we are systematically denied permits. The explanation is to protect the state-owned carrier Aerolíneas Argentinas.” In the past few years, Argentina has denied numerous Pluna applications for routes to cities like Mendoza, Salta, Bariloche, and Trelew, most of which see no international service from Aerolineas Argentinas anyway. Campiani further added that, “Brazil is very helpful in granting permits for landing slots, and has worked hard with us to help our development in a way that we have not found in Argentina.”
The differences between Brazil’s treatment of Pluna versus Argentina’s are staggering, and indicative of a broader protectionist push by Argentina under the government of Cristina Kirchner. Regardless, Argentina’s stance has forced Pluna to shift its capacity allocation strategy towards Chile and Brazil. Pluna now faces serious competition for international passengers at Aeroparque, though it does offer a slightly more varied destination portfolio than Aerolineas Argentinas.
It is important to keep in mind, however, that Pluna is a carrier that has not made a profit in a number of years. They are still scheduled to lose money in 2011, and despite a vote of confidence from Jazz, the Canadian regional carrier, very real questions remain about Pluna’s financial viability. The price of fuel, as with most carriers, is a concern going forward, but the bigger question is whether they can continue to attract a share of international passengers to connect through Montevideo.
From a long-term perspective, the growth in the Uruguayan market should buoy Pluna’s prospects. Range limits for the CRJ900s may become a constraint down the road, but there are still numerous destinations in Brazil, as well as some in Chile, Paraguay, Bolivia, and even Argentina should the local government’s stance soften in the future. Operational profitability has already been achieved, and Pluna may be able to eke out a net profit by mid-2012.