Transportation Industry

Company Watch - Aerolineas Argentinas

AirGuide Business, July 21, 2008

7/21/2008

Aerolineas Argentinas' future ownership structure, agreed to earlier this year, has been cast in doubt and Argentina's government reportedly is considering a full nationalization of the carrier. Spanish tourism and transport giant Grupo Marsans announced in May that it had agreed to lower its holding in Aerolineas from 95% to 35% so the government could raise its stake from 5% to 20%, airline employees could take 10% and Argentine private investors could hold the rest. But, according to Argentina's La Nacion, the carrier has racked up $400 million in debt this year and has been forced to ground a number of aircraft. With service levels waning, the government will seek to have a court-appointed administrator take over decision-making this week. Legislation to nationalize Aerolineas Argentinas is being considered. Marsans responded by accusing the Argentine government of "driving us out of the company" and backing away from the prior agreement. 7/14/2008

Marsans, earlier this year, reached a preliminary agreement to cut its stake in Aerolineas to 35 percent, including selling a sizable number of shares to the government and an Argentine businessman. The state currently holds 5 percent. However, the deal did not advance. Analysts say the government's moves on Aerolineas could signal another step toward what media dub the "Argentinisation" of prominent public service companies. In the past, foreign companies such as Brazil's Petrobras, Spain's Repsol and France's Electricite de France, have sold their stakes in Argentine companies to business leaders seen as close to President Fernandez and her husband and predecessor, Nestor Kirchner. During his administration, Kirchner nationalized the postal system, the country's largest water and sewage company, a train company and the administration of the airwaves. Privately owned Marsans bought Aerolineas in 2001 when the company was bankrupt. Aerolineas has 80 percent of the domestic flights in the country, and its main competitor is Chile's LAN Airlines. 7/15/2008

Spanish travel group Marsans has agreed to sell troubled airline Aerolineas Argentinas to the government of Argentina, a source close to the negotiations said on Monday. Aerolineas is under pressure from trade unions and the administration of President Cristina Fernandez, which asked a judge last week to appoint an administrator at the airline to guarantee flights and the payment of overdue wages. Aerolineas, the country's biggest airline, has been plagued by strikes, complaints about poor service and it faces mounting debt under state-controlled fares despite subsidized jet fuel. Argentine daily La Nacion said Marsans had agreed to sell its 95 percent stake, but the price and the size of the airline's debt still needed to be agreed upon. The government says the airline has a debt of USD$890 million, including long-term debt and aircraft leasing commitments, as well as USD$240 million in short-term debt. Dozens of passengers booked with the flag carrier faced delays on Monday due to cancellations, a scene that has become increasingly common in recent months. 7/15/2008

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