Aerolineas accords remove roadblocks to IPO

Seattle
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By David Knibb in Seattle

Spain's Marsans Group has cleared the way to sell up to 45% of its stake in Aerolineas Argentinas.

The deal follows recent accords with the airline's two chief antagonists - its unions and the Argentinian government. The labour deal, involving seven unions, came first and was a prerequisite to any accord with the government.

Argentina's populist government has been supportive of unions, and Ricardo Cirielli, subsecretary for commercial aviation, was a former union leader at Aerolineas. One indication of the close ties between government and labour was that high-ranking government officials took part in the negotiations, while Aerolineas president Antonio Mata stayed away from the talks because of union animosity toward him. In a clear sign a new era is dawning, Mata, known for his tough manner, has since been ousted from Aerolineas for criticising the agreement.

The union accord brought an end to one of the longest-running labour disputes in the airline's history and cleared the way to resolve other issues with the government. Government and union officials had long complained that money paid to the Marsans Group by the Spanish government as part of Marsans' purchase of Aerolineas had been misspent. Conversely, Marsans complained that Buenos Aires had frozen domestic air fares at unreasonably low levels for four years despite rising costs, especially for fuel.

Once Aerolineas reached agreement with its unions, government officials announced that a new decree would soon raise domestic fare caps and the government would consider ways to subsidise unprofitable "social" routes.

That resolves an immediate problem, but Aerolineas and the government have also agreed on a long-term issue. Buenos Aires will be allowed to increase its stake in the airline from 1.4% to 5%, with the option of buying a further 15%. With the right to designate two board members and one of the three trustees, the government gains a critical role in the airline's long-term management.

The government will also drop its objections to annual financial reports issued by Aerolineas. Those objections have blocked the airline's formal exit from court-supervised administration. This, in turn, has blocked the Marsans Group's plans to sell shares through a private placement of 15% of the carrier's shares to institutional Argentine investors, followed by an initial public offering of a further 20% to 29% on the Buenos Aires and Madrid stock exchanges.

The last point in this accord gives the government the option to buy the 15% stake slated for private placement. This could boost the government stake in Aerolineas to 20%. ■