The management of Aerolineas Argentinas is on the verge of adopting parts of two conflicting proposals as it struggles to find the best way to restructure and save the flag carrier.
Unable at a meeting in July to agree on the airline's future course, shareholders decided to meet again in mid-September. That meeting, due as Airline Business closes for press, could decide the airline's future. SEPI, the Spanish holding company that controls a majority of Aerolineas shares, agreed to keep the airline solvent until then while it tried to persuade hostile airline employees - who hold 10% of the airline's shares - to accept its cost-cutting plan. But SEPI warns it will not keep propping up the airline.
Three of the five unions representing these employees are backing a plan far different from SEPI's. While SEPI wants to cut staff, salaries, fleet and routes, and requires existing shareholders to inject $650 million in fresh capital, the unions propose to capitalise debts, expand routes through better fleet utilisation and bring in new investors, including an international airline. Continental Airlines and Delta Air Lines are both mentioned as candidates, although neither will comment. The pilots also are interested in buying shares through salary and benefit concessions.
Aerolineas management has since taken two steps that seem more consistent with the unions' emphasis on expansion rather than costs. First, it relaunched a service to Los Angeles in early September, predicting it will break even within three months. Second, it announced plans for flights starting at the end of September beyond Madrid to three other European cities. It estimates that these European flights will generate $18-$19 million a year.
But Aerolineas is also cutting costs. It is talking with Varig about a possible Buenos Aires-Sao Paulo codeshare and co-operation in other areas, especially aircraft maintenance. Locally, it has agreed with Dinar and Southern Winds to codeshare on domestic routes. Austral, the Aerolineas domestic airline, will also join this programme. Transferring local routes to these carriers has been a contentious part of SEPI's plan for Aerolineas.
Dinar, Southern Winds, and Austral have also agreed to codeshare among themselves, effectively pooling the resources of all three. LAPA, the other major domestic carrier, was invited to join this group but opted out, criticising it as the formation of a cartel.
These moves give the Aerolineas shareholders another option to consider besides the opposing plans from SEPI and the unions. With SEPI controlling 68% of the shares, however, the question may come down to how willing it is to share control with new investors.
Source: Airline Business
