Argentina could knock its airline industry out of kilter with the March sale of government-owned Lafsa, creating a third carrier to stand alongside Aerolineas Argentinas and Southern Winds.

Lafsa, which has a workforce but no aircraft, was formed by Buenos Aires to employ staff from two failed airlines. The government turned its operations over to Southern Winds to keep Aerolineas from expanding its domestic dominance beyond an 82% market share. That has made Lafsa a paper airline that could upset a delicate balance if it becomes a real one.

So far, five parties have expressed interest: Southern Winds, LAN, Mexicana, Spain's Air Europa and Italy's Volare. The terms of the proposed sale call for the government to retain a golden share with a veto over major decisions. Any buyer would also be obliged to keep all of Lafsa's 850 employees for three years.

Aerolineas remains silent about Lafsa's sale, fully aware that, with its current dominance, Buenos Aires would never allow it to bid. LAN has retreated from its early interest due to labour concerns. Lafsa's staff are paid above industry levels, are pressing for more and oppose privatisation. LAN describes Lafsa's staff as "uncontrollable".

Concerned by the prospect of Lafsa falling into the hands of another carrier, Southern Winds is scrambling for a way to buy it. Patricio Seidel, president of Buenos Aires-based ConsultAir, warns that there is no room for Lafsa, Aerolineas/Austral and Southern Winds as separate airlines.

"Southern Winds is not in a financial situation to embark on such a project on its own," adds Siedel. "It must bring in a financially sound partner."

Hence, Southern Winds has opened talks with LAN. The Chilean carrier may have labour concerns but chairman Jorge Awad insists that LAN's entry into Argentina this year is a priority. Southern Winds is unwilling to cede control to LAN but both carriers may eventually need each other.

Another Southern Winds option may be via Volare, controlled by aviation entrepreneur Eduardo Eurnekian.


Source: Airline Business