Aerolineas Argentina


Jan 31, 2006
I spend about 10 years in the airline industry, and I am
watching the takeover of Aerolineas Argentina
with interest. Here are some of the things I have been able to find out:

airline has about 65 airplanes only 6 are owned the rest are leased. Only
about half their fleet is in service. They
employ about 9,000 people. Total debt is around 900 million very,
very high. [/list]

This looks like a complete basket case to me. They are operating
only about half the fleet (some very expensive pieces of technology are sitting
on the ground producing nothing). I have to assume there just isn’t a market to
support this number of aircraft or they would be in the air.

If this is the case the airline only needs 30-35 planes. The
rule of thumb in the airline business is that you need roughly 100 employees
per aircraft. That means they have three times the number of employees they

Strictly from a business standpoint it’s obvious that if you
wanted to operate an airline here you would be much better off shutting this
one down and starting a fresh with the right number of aircraft and employees,
and not being burdened with debts of this magnitude.

I understand this will be voted on by Congress here.
Hopefully they will continue to show some back-bone and vote this down.

My guess is the plan is to have the taxpayers assume
responsibility for the debts and later turnover the ownership to presidential
cronies for a song. However, I don’t see
how this could ever stand as a private company with the degree of overcapacity
and overstaffing that is apparent today.
Spanish Iberia took over the majority of AA in 90's. There was a lot of subventions and help from the spanish government in that years but they can't make it to get AA profitable.
They sold it to the spanish Marsans group and they also invested strongly - without success ($30,000,000 loss per month actually). There is a lot of press now as of this "re-nationalization" of AA now and the government wants to promote this step as "good for Argentina" that AA is argentinian again. But this all is really so stupid. I think there is absolutely no way that the government can make this company profitable and attractive for possible future privatization ...
I'm just here for a couple weeks, but my partner and I took LAN to Iguazu - it was packed. The service was just great, comfortable, friendly, etc. We are staying in Palermo as well. I'm just here for a couple more weeks, while he's here studying at a culinary institute. Thanks for the insight into the AA articles I've been trying to read! Dick
Stan, I completely agree with you.
Apart from the economic irrationality of renationalizing Aerolineas, there's a thing that bothers me even more.
This government is constantly talking about social justice and bettering the lives of the nations poor. That simply doesnt rhyme with investing hundreds of millions in a company that offers a service that is only used by people that actually have got money to spend. Same thing as the "tren bala".
I do understand that the renationalization has a great symbolic value. Many of the former state owned businesses were the pride of the nation. Aerolineas Argentinas, YPF etcetera. They were well-ran companies. Because the wave of failed privatizations during the Menem era, many people see neoliberal economic policy as a threat for their wellbeing. And you can't really blame them in this case: AA went rapidly downhill after the privatization. Most people think that renationalization will restore Aerolineas (which used to have a splendid reputation before it was privatized) to its former glory.
Stan, I happy to report I agree with you on this one. Why purchase something that is obviously broken and try to fix it unless the price is to good to pass up? I think the government should purchase a plastic surgery clininc, something they know more about, than running an airline.
Hmmm, this thread is going in the wrong direction, everybody agrees. Did I really enter or am I dreaming?
Well I'm glad everybody can agree, at least so far. It will be interesting to see how this unfolds in the coming weeks and if anybody seriously challenges the government. There's got to be an angle here where these people plan on filling their pockets off of this deal. It's either it will go private later to friends (after the taxpayers foot perhaps hundreds of millions in costs) or some sort of kick-back from the sellers (Marsans) under the table, or some combination of both. In any event this is a loser for the people of Argentina.By the way I saw in La Nacion today that they are now proposing a second high speed train to Mendoza. Doubt this will make much more sense than the first one. Concern is growing in some quarters about the financial stability here. After the defeat of the retentions tax where is all the money coming from to pay for all this stuff? It there some new set of taxes being considered we don't know about?Perhaps there will be a big hike in IVA or property taxes, or new taxes on something else. Maybe they will have a special tax on expats, about all we could do is complain as we can't vote.
Renationalising a loss-making operation. Pathetic. Let it shut down. No wonder the Argentinian state is running such big deficits. Airlines the world over are losing money as they can only pass on a fraction of their fuel price increases to their customers (demand is elastic with regard to price). Who in his right mind would want to buy an airline today?
Watch TN, Cronica or C5N and you will see why they have depth
Only in Argentina a company can be bought by the state without knowing the balance-sheet
Look at it this way, Cristina tried screwing with the economy's number one sector, farming/exporting and she lost. It only makes sense to go after number 2, tourism. What better way than to be the airline.
BTW, cheapest round trip BA-Bariloche for tourists is $458 last I checked, no bueno!