Argentinian state-owned regional airline LAFE is due to launch services next March, but it may soon be called in to rescue rival Argentinian carrier Southern Winds.

The government set up LAFE in July - taking an 80% stake - to avoid an Aerolineas Argentinas monopoly on domestic routes after the collapse of local carriers LAPA and Dinar. LAFE chief executive Alberto Bidart wants the state to provide funding of $8.6 million, which would cover the lease of up to six Boeing 737-200s, and claims the investment would be recovered within nine years.

In response to Aerolineas Argentinas' concerns over state involvement in airlines, Argentina's government has committed to sell its 80% stake within six months of launch. Interested buyers include LanChile, Mexicana and Brazil's TAM, as well as locals American Falcon, Cata and Southern Winds.

However, as well as rescuing 850 ex-LAPA and 350 ex-Dinar staff, LAFE may now be called on to save Southern Winds, which is reportedly on the verge of suspending operations due to falling domestic revenues and the high costs of its Miami services. Although Southern Winds denies it is in danger, local sources indicate the airline is seeking a government bailout, which may include either an alliance or merger with LAFE.

Source: Flight International