It's an incestuous business. As Iberia was negotiating the sale of a major part of its stake in Aerolineas Argentinas to secure state aid approval from Brussels, the Argentine flag carrier was preparing to sell its shareholding in its domestic subsidiary indirectly to Iberia's parent.

At presstime, Aerolineas was close to selling its 100 per cent stake in Austral to its own majority shareholder Interinvest for a net gain of $40 million, which it will use as working capital. Interinvest has 53 per cent of Aerolineas shares and is solely owned by Iberia's state holding company Teneo. Iberia has a 30 per cent holding in Aerolineas.

At the same time, a deal was being hatched to sell a major part of the 83 per cent of Aerolineas managed by Iberia to two US banks - Bankers Trust and Merrill Lynch. A source close to the deal indicates the two financial institutions would take a 49 per cent stake in Aerolineas with Teneo retaining 34 per cent.

Aerolineas had a net loss of $58 million for the year to 30 June 1995 and needs $400 million to clean up its balance sheet. The problem for Aerolineas is Iberia, says the source. 'There are people interested in Aerolineas, but no one wants to give managerial control to Iberia. Without them, investing is possible but with them it cannot be done,' he adds.

The sale of Aerolineas will clear the way for Brussels' approval of at least part of Iberia's requested state aid. One senior Iberia source says the carrier still expects to receive 'in the region of Pta100-130 billion' to help clear Pta300 billion ($2.5 billion) of debt from its books.

Sara Guild

Source: Airline Business