Argentina considers privatizing Aerolíneas Argentinas amid ongoing financial struggles

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Argentina considers privatizing Aerolíneas Argentinas amid ongoing financial struggles

Policy

Airbus A310-325 | Wikimedia

By Sky Industry News

Feb 3, 2025

Aerolíneas Argentinas, the state-owned airline of Argentina, has faced significant challenges in recent years due to the COVID-19 pandemic and economic difficulties. The airline has been struggling with low passenger numbers, reduced financial performance, and high operational costs. It has also had to cut routes due to increased competition.

The carrier recently withdrew from its lucrative route between Ministro Pistarini International Airport (EZE) and New York's John F. Kennedy International Airport (JFK), which attracted high-spending travelers. This decision is part of a broader struggle with financial losses.

The airline's outdated fleet of Airbus A330s further compounds its problems. These aircraft lack competitive business class offerings compared to US legacy carriers like United Airlines, Delta Air Lines, and American Airlines, which operate more modern jets on similar routes.

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President Javier Milei, who took office in December 2023, is a vocal critic of the state-run airline. He argues that privatizing Aerolíneas Argentinas could alleviate government spending issues and improve the airline's fortunes.

However, past attempts at privatization have not been successful. In the 1990s under President Carlos Menem, Aerolíneas was privatized but faced significant debt and mismanagement issues. A consortium led by Iberia acquired an 85% stake in the company but later reduced it after financial struggles persisted.

By 2001, amid Argentina's financial crisis, Aerolíneas filed for bankruptcy protection before being partially rescued by the Spanish Marsans Group. The government eventually renationalized the airline in 2008 under President Cristina Kirchner due to ongoing disputes over management and sale prices.

Lessons from these experiences suggest that while Aerolíneas Argentinas can generate profits when operating as a private entity with reduced network size and costs, it faces challenges when required to maintain unprofitable routes as a public service provider.