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While Latam throws in the towel, Airlines asks for a state contribution of US $ 900 million

2020-06-18T18:36:27.455Z


In 2019 the flag line lost $ 570 million. This year the red grows due to the devaluation and the coronavirus.


Annabella Quiroga

06/18/2020 - 14:33

  • Clarín.com
  • Economy
  • Economy

The Latam crisis opens the field for Aerolineas Argentinas so that, leveraged in the subsidies allocated by the government, it will further increase its dominant position in the local market. It is estimated that the flag line could receive  a state contribution of US $ 900 million this year.

Aerolineas Argentinas controls, together with Austral, 60% of the cabotage market. The Chilean / Brazilian company was the second player in the sector with 16% of the market share. Yesterday he announced that he is leaving the Argentine market hacked by the coronavirus and after having lost US $ 260 million in the last two years.

Now, the market is reconfigured and this opens up the possibility for Airlines to recover the portion that they lost during the four years of Mauricio Macri's presidency from the landing of low cost airlines. In 2015, the Aerolineas group, which added the flights of the parent company and those of its subsidiary Austral, had 75% of a cake of 12 million passengers. Now the market is bigger, at around 17 million, so although Airlines lost share, it still sells more tickets than it did five years ago. 

Despite its dominant role, Airlines needs subsidies to function. Before the pandemic, it was anticipated that the government would have to provide the company with US $ 700 million to keep it in the air. Airlines closed 2019 with a deficit of US $ 570 million . That same year, Latam Argentina lost US $ 133 million

Unlike Airlines, Latam is a private company that does not have state contributions. Of Chilean origin, in 2010 it merged with the Brazilian TAM. It was there that he changed his name from Lan to Latam. With this merger, it became the most important airline in the region with 74 million passengers carried. In Argentina it carried 3 million passengers and linked 12 destinations.

Aerolineas Argentinas set a record by transporting  13 million passengers in 2018 . For the government, taking care of the company is a state policy. "It is not always correct to analyze linearly the operating cost of airlines, how much they earn and how much they lose in terms of sales. Whenever we are generating economic activity towards the interior of the country, it is an important gain," the minister had said before the pandemic. Transportation Mario Meoni before the consultation for the bulky red of the flag line

Aerolineas y Austral were nationalized in 2008 by the government of Cristina Kirchner. A study by the consulting firm IDESA establishes that in the last 12 years, "the state has assigned Airlines $ 28.3 billion, 50% more than what was allocated to combat hunger since the Food plan required $ 18.4 billion between 2008 and 2020 " The measurement was made in pesos at current prices.

In 2019, Airlines had invoiced US $ 1.7 billion. Due to the pandemic this year, it saw its income drop to almost zero from April. At this time the only income comes from State aid.

A month ago Pablo Ceriani, current president of Aerolineas, informed employees that despite the crisis "there will be no layoffs or salary reductions." And he detailed that this year the company will need US $ 900 million from the Treasury . The government has not yet confirmed that it will make that disbursement.

In early May and on the back of the coronavirus crisis, Ceriani announced the merger of Aerolineas and Austral . He did so in a letter addressed to the nearly 13,000 employees of the two companies. The merger would take place from here to the end of the year and they would seek to save US $ 100 million annually only by absorbing duplicate tasks.

Until now, the company has been resisting without stoppage the stoppage of activity due to the coronavirus. It programmed  103 repatriation flights that allowed 25,000 Argentines to return to the country  and made several flights to China to bring supplies to attend the pandemic. Ten days ago, the airlines agreed with the unions to suspend  4,000 employees for two months , without cutting income. In this period, the company will pay them a "non-remunerative sum" instead of the salary, with which they will not have to make employer contributions. Added to the per diem savings, it is estimated that the net savings of this agreement will be $ 550 million .

Source: clarin

All business articles on 2020-06-18

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