Aerolineas pulls back from the brink

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Argentina's grand old airline has emerged from court-supervised receivership (or administration) after surviving a two-year drama that almost brought about the carrier's collapse.

Aerolineas Argentinas went under court protection in June 2001 after a stormy showdown between unions and SEPI, the Spanish state holding company that controlled the airline. Aerolineas suspended routes, grounded aircraft, and almost shut down. Later that year SEPI sold its 92% stake to the Spanish consortium Air Comet, which includes the Marsans tour company, Air Plus, and Spanair.

Since then the new owners have made peace with the unions, injected capital, restored services, and gradually brought Aerolineas back from possible collapse. Antonio Mata, Aerolineas president, says the airline has been profitable since July, and expects to show a 2002 net profit of nearly $5 million.

The airline's major creditors have approved a plan that reduces Aerolineas debt by 40% to some $646 million, payable in three instalments. The first payment, representing 10%, is due on 26 March, with another 35% due in December, and the balance in December 2005.

The court approved this plan after noting that Aerolineas has restored service on most international routes, created a hub in Madrid, regained a domestic market share of 80%, established a maintenance base at Buenos Aires and kept peace with its unions.

With Aerolineas released from court supervision, it is now free to go ahead with its ambitious 2003 business plan. That includes new routes, merging domestic subsidiary Austral into the main airline, starting a long-term fleet renewal, and floating part of the company to attract new investors. Aerolineas also plans to launch subsidiaries in Chile, Bolivia, Uruguay, and Paraguay. Mata predicts these units will start operating between July and September.

A major reason for these subsidiaries, says Mata, is to "diversify the risks" of doing business in Argentina. The country's four-year recession has bottomed out, but the business environment is still brutal. Domestic flights operate at a loss, partly due to government-imposed low fares.

With national elections due in April and May, economists fear Buenos Aires will not confront Argentina's underlying ills, raising the prospect of more defaults, devaluation and uncertainty.

DAVID KNIBB SEATTLE