Argentina plans to sieze Aerolíneas Argentinas from Spanish group Marsans

Lawmakers of Argentina have approved a draft Bill to seize back Aerolíneas Argentinas, the largest domestic and international airline in Argentina and also the country’s flag carrier, and its domestic subsidiary Austral airline from its present owners, the Spanish group Marsans.

The Argentine government’s move to seize back Aerolíneas Argentinas without compensation came after negotiations with Marsans failed.

Lawmakers in Argentina’s lower house of Congress voted 152 in favor and 84 against the expropriation Bill, which still needs to be approved by Senators before it can become law.

Agustin Rossi, head of the ruling party bench in the lower house, was quote as saying about the move: “Our aim is to safeguard a public service that we think is vital for Argentina.”

Aerolíneas Argentinas accounts for 83% of Argentina’s domestic traffic and 52% of international flights from Ministro Pistarini International Airport, which is located in Ezeiza, Buenos Aires. Aerolíneas Argentinas and LAN Airlines, an airline based in Santiago, Chile, are the only Latin American airlines that fly to Oceania.

For several months now, Aerolíneas Argentinas has been weighed down by labour disputes and flight cancellations. The Argentine government says that the airline’s debts add up to about $900 million.

Marsans had agreed in July 2008 to sell Aerolíneas Argentinas and its subsidiary Austral to the government, but talks over the company’s value had bee stalled.

Media reports said that Marsans, based in Madrid, Spain, has vowed to seek international arbitration if Argentina seizes Aerolíneas Argentinas from it.

In November 2008, a court in Argentina had agreed to oversee the day-to-day running of Aerolíneas Argentinas. The government had argued that court supervision was necessary to guarantee services and jobs.

Aerolíneas Argentinas and Austral together employ about 9,000 workers and operate 83% of Argentina’s domestic flights.

According to analysts, gaining control of Aerolíneas Argentinas would mark another step by Argentina’s centre-left government to step up state or local investor participation in companies tied to key economic sectors that were largely privatised during the 1990s.

It was when Aerolíneas was on the brink of bankruptcy in 2001 that Marsans bought the airline from a group controlled by the Spanish government. The carrier was first privatised in the early 1990s.

The Argentine government and Marsans signed a deal in July 2008 to re-nationalise Aerolíneas and its domestic subsidiary Austral, which Marsans bought seven years ago for one “symbolic” dollar.

The agreement between the Argentine government and Marsans called for a third party to assess the airline’s value if Argentina and Marsans failed to agree on a price by mid-November 2008.

But Argentina did not seek a third-party valuation. Instead, an Argentine parliamentary commission recommended that Argentina expropriate both Aerolíneas Argentinas and Austral, arguing that they were “worthless.”

Ricardo Jaime, Transport Secretary of Argentina, in a declaration in an Argentine court, valued Aerolíneas Argentinas at minus $600 million (475 million euros) because of debts the troubled airline had accumulated since it was first privatised in 1990.

But Marsans, which holds a controlling 94.4% in Aerolíneas Argentinas, argued that a study by Credit Suisse bank showed that the value of Aerolíneas Argentinas and Austral is between $250 million and $450 million.

The government of Argentina, which holds a 5% stake in the airline, was compelled to give Aerolíneas $183.5 million in 2008 to keep it working and pay its 9,000 employees.