American's parent AMR and SEPI, the holding company for interests owned by the Spanish Government, have been trying to resolve their differences and agree on a plan to restructure Aerolineas. It is too early to tell if SEPI, which together with Merill Lynch and Bankers Trust, controls 68% of Aerolineas, will allow AMR to keep on managing the airline.
Continental Airlines is waiting in the wings and has had talks with SEPI. Two years ago it vied unsuccessfully with AMR for control of Aerolineas. Continental says it is still interested, but SEPI says it will not consider other proposals unless it first rejects AMR's.
AMR bought 8.5% of Aerolineas and took over its management from Iberia Airlines in 1997. Since then, Argentina's flag carrier has struggled. With debts of $800 million, 1999 losses estimated at $120 million and double those of a year earlier, SEPI and Buenos Aires are critical of AMR's management, pointing to an expensive Sabre contract and a shift in fleet strategy from local and regional routes to long hauls. SEPI is also troubled that AMR did not deliver on a disputed promise to find other buyers for SEPI's stake.
AMR could argue that Argentina's lagging economy is not its fault, that Brazil's 1999 devaluation killed local traffic and that Buenos Aires rejected the best offer to buy Aerolineas because it came from rival LanChile.
Argentina's new government, which has been critical of the Menem administration it replaced in December, warns that the government will not rescue Aerolineas. But the flag carrier's uncertain future has caused it to put on hold plans to ratify the US open skies pact negotiated by the Menem government.
Source: Airline Business
