Spanish take over Aerolineas reins

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Argentina has no tears for American Airlines or its parent AMR as the Spanish state holding company, SEPI, replaces US corporation in the cockpit of Aerolineas Argentinas.

The glee over AMR's departure from Aerolineas may be short-lived, however, as SEPI and Argentina start to grapple with the realities of rescuing the debt-laden and persistently unprofitable flag carrier.

Argentina's new government seems to regard it's predessor's open skies accord with the USA as a mistake, exceeded in bad judgment only by the 1990 privatisation of Aerolineas. It has therefore stepped in to suspend ratification of the new bilateral in an effort to save Aerolineas.

What happens next remains to be seen. Initially, infrastructure minister Nicolas Gallo said the cash-strapped government, which owns 5% of Aerolineas, would not invest "one more peso". Since then, however, SEPI has put up $70 million to keep Aerolineas afloat, installed an Argentinian as general manager, pledged every effort to save the faltering airline, and promised a restructuring plan by March. After meeting SEPI, Gallo said the government would wait and see what SEPI proposes.

SEPI faces a daunting task. Aerolineas has lost $927 million since 1992 and is burdened with debts of over $800 million. Analysts claim the airline has lurched from one money-losing idea to another with no clear strategy. Unions, meanwhile, say they will oppose a restructuring. SEPI already has rejected their demand for representation on the Aerolineas board.

Other shareholders are not enthusiastic about SEPI's warning that all of them will need to stump up more capital to save the ailing carrier.

Meanwhile, Argentina's neighbours are poised to exploit the uncertainty. LanChile's largest shareholders, the Cueto family, tried earlier to invest in Aerolineas, but were turned down. Now LanChile says it may launch an Argentine subsidiary of its own.

Peru's AeroContinente plans to launch services to three Argentine cities, including Buenos Aires, starting in mid-March.

With winter approaching, Aerolineas faces the prospect of more turbulence and uncertainty.