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Airlines in the region are in serious trouble. A storm is coming?

May 28, 2020

With the arrival of the corona virus and its rise to pandemic status, the closure of borders was one of the first measures taken by the world’s governments. The decision was obviously a major blow to the airlines. It has never been an easy business. Business has always been complicated and relatively easy. In a way, it’s also a thermometer for the overall economy. Be good during a bullish cycle and bad during a bearish cycle. Crises are not very friendly for airlines. But this crisis was devastating. And a little bit more for airlines in Latin America. The clouds are very gray and there are predictions of cross winds. This can be postponed. You have to tighten your belt because it’s a storm.

Latin America does not have the advantages of the United States and Europe in terms of road or rail infrastructure. You cannot take a train in Caracas and be in Buenos Aires every day. Yes, there are roads. And of course you can take a car and explore the region. But that’s still a big adventure. If you said you drove through Latin America by car, you would earn a reputation as a fearless adventurer. This means that the exception confirms the rule.

Latin American roads are not very good. We cannot say that the region is perfectly connected to highways that are suitable for their development. On the other hand, driving through the US or Europe is not a big deal. To say that you traveled from Los Angeles to New York by car would not be written in an adventure book. And if we write it down, few readers will be impressed. In other words, airlines are very important to Latin America. The region is connected to the world by air.

Airlines in the region are in serious trouble. A storm is coming?Airlines in the region are in serious trouble. A storm is coming?

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The airlines in the region are really few. All activities take place in a few companies. The big three are Latam, Avianca and Copa. Well, the main characters may be few. But the sector is generally not small. We are talking about almost half a million jobs. And these are formal jobs in a region characterized by informality.

The largest airline in Latin America is the Brazilian Latam. In fact, it’s Brazilian and Chilean because it’s the result of the integration of a Chilean and a Brazilian airline. The company has n41,000 people crowd. Avianca is the oldest company in the region and the second largest. Colombia has 14,000 employees and almost 21,000 across Latin America. The Panama Cup shares the throne with the two previously mentioned. For brevity, I won’t be talking much about Copa.

Latam and Avianca have already filed for bankruptcy in the United States due to the pandemic. They are protected by the famous Chapter 11 bankruptcy law. The drop in income has been very large due to the restrictions imposed and there are problems. This means that many jobs are at risk. Not only because of the strategic importance of these airlines, this is a serious problem for the region.. This is also a problem for economies, for investors, for employees and for users. It is everyone’s problem.

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We’re not talking about these companies closing the deal and it’s all over. No, What is really asked is a little pause to catch your breath. In other words, the operations will continue, but there will be changes, negotiations with creditors and “difficult decisions”.

Of course, Latin American airlines have a harder time than their counterparts in the United States and Europe. It’s not easy to be an airline in this colorful region of the planet. And now much less. There are several reasons for this.

Latin American governments have shown less willingness or ability to help their airlines. It seems that politicians think it’s a private matter. Or they just have so many problems that their attention is now somewhere else. However, the miserable difference between the US and European attitudes towards their airlines and Latin America’s attitudes towards their airlines is strange. They support airlines in the crisis, but support was not strong at all in Latin America. In fact, both citizens and the government have been fairly indifferent to the problem.

In the United States, the four largest airlines receive billions of dollars in aid: American Airlines, Delta Airlines, United Airlines and Southwest Airlines. France and the Netherlands support Air France-KLM. And the Germans do the same with Lufthansa.

Unlike other regions, airlines in Latin America face additional challenges: Excessive regulation, instability, poor infrastructure, apathetic governments, indifferent citizenship and hostile unions. Yes, the challenges aren’t just about capacity. There is a very strong cultural component here. The private sector has neither the support nor the reputation that it enjoys in the northern countries.

For example, the case of Avianca, a Colombian flag company. What do some say about Avianca? Things like this: “Is it really Colombian? Should we support a billionaire who is not even a Colombian?“” In the case of Latam, the comments are similar. “”Should we support a few wealthy families with millions?

And the unions quickly turned their employers into film villains. Now the aviation unions in Latin America and the Caribbean are an organization that coordinates the unions in Latam, Avianca and Copa. It is really scary to listen to Dina Feller, the manager of the network. That is why we are the way we are.

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Here’s a remake of Sleeping with the Enemy, but without Julia Roberts. The strangest accusation is that the cuts were made in March and the crisis only started later. And also that the “bad guys” will surely use the crisis to drive the automation and outsourcing of processes. In addition, the crisis is exaggerated as airlines do a lot of freight transportation, an area that is less affected by the restrictions. In other words, the airlines are drowning and the unions are putting a tube in their mouths. You are always the bad guy. Why don’t they put pressure on their governments to do more? Work with your employers, not against.

Why should we care about airlines in Latin America as Bitcoin enthusiasts? Well, because Bitcoin is not an island and is influenced by its surroundings. The idea that Bitcoin is proof of everything and that the more the world is burning, the better for Bitcoin, is a myth. It is absurd to put our hopes on collective shame. Gold investors have been doing this for a long time. Gold is a bet on fear. It is the favorite of reactionaries and ultra-conservatives. Despite what many libertarian cryptanalysts say: It’s hard for me to see Bitcoin as an asset built out of fear. “Really?” Like the radicals with thinning beards and long weapons who live on a farm in the southern United States and buy gold to bury in their yards because they don’t trust the system.

You don’t have to be a genius to know that Bitcoin is different. Bitcoin is youth, risk, innovation and future. It’s positive. During this crisis we saw a very strong correlation with the other markets. What does that tell us? Well, Bitcoin takes care of the world. Bitcoin is part of the world. If the ship catches fire, we will also feel the heat.