Aerolineas Argentinas restructures ahead of planned privatization

Policy

Simple Flying | Simple Flying

By Sky Industry News

Jan 10, 2025

Big changes are taking place at Aerolíneas Argentinas as the airline prepares for privatization and a potential buy-out. Over the past year, the airline has made significant adjustments by reducing its workforce by 13% and cutting less popular domestic routes. Additionally, free snacks on shorter flights have been eliminated.

The closure of ticketing offices in Ushaia and El Calafate also took place in late 2024. The airline stated that affected employees would be transitioned to new roles at local airports.

These measures were implemented under the directive of President Javier Milei's libertarian government. The administration aims to "trim the airline's burden on the state" as part of broader economic reforms intended to address issues like inflation and public debt through privatization.

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Despite these changes, there has been opposition to President Milei's policies. In October, transport workers, including those from Aerolíneas Argentinas, staged a 24-hour strike against the government's pro-market reforms.

Preliminary financial results suggest that Aerolíneas Argentinas is poised to achieve record profit margins this year, surpassing last year's $32 million earnings.

To enhance its attractiveness to potential buyers, Aerolíneas Argentinas has entered into a codeshare agreement with LATAM Airlines Group. This partnership allows customers to earn and redeem miles across both airlines' networks. Speculation suggests that this move might position LATAM as a contender for future private control of Aerolíneas Argentinas.

Avianca may also pursue a codeshare agreement with Aerolíneas Argentinas to maintain competitive parity if LATAM acquires a stake in the Argentine carrier. Avianca is actively seeking growth in the South American market and already has an existing relationship with Aerolíneas Argentinas through Abra Group's Memorandum of Understanding signed in October 2023.

This is not Argentina's first attempt at privatizing its national airline. Between 1990 and 2008, it was privatized but faced financial challenges leading to re-nationalization under President Kirchner due to mismanagement and labor disputes.

President Milei explained his rationale for re-privatizing: "...since its re-establishment...in 2008, the company has never closed a year with a positive balance sheet..." The ongoing subsidies required have exceeded $8 billion.

The coming years will be critical for determining whether privatization can resolve Argentina's economic challenges and ensure success for its flag carrier.