22 July 2008

Aerolinas Argentinas back in government hands

Well, it didn't work out very well for Spanish travel company Marsans, after they bought Argentina's national airline Aerolineas Argentinas about 20 years ago. To say that the company is not doing well is something of an understatement. Losing $1million a day and being $900 million in debt might make you a bit glum.

However, the government has decided to buy back and renationalise the airline as it is in danger of folding and you can't really let your country's main airline collapse. It's a matter of pride. But no matter how romantic the government's intent, the troubles Aerolineas Argentinas is faced with will take a lot of work to solve.

The Argentine government seems to have put themselves into something of a pickle. The airline is overstaffed and all of their staff are represented by at least one, in some cases more, workers' unions. Making cutbacks in staff will pretty much immediately result in strikes, especially as the government will be the new boss. Add to that the fact that more than half of Aerolineas Argentinas' 67 strong fleet has been grounded in recent years, and you get yourself a great catch 22.

The company is in debt and needs more airplanes so it has to cut costs. But in order to do that they will most definitely have to fire people. And then the rest of the employees will go on strike, and then income will stop. However if cutbacks are not made, debt will continue to accrue. That's a precarious situation if I ever saw one. Maybe the only way out of this is some drastic expansion.

Well I wish them all the best and I hope they have some great business minds on the job because it's a tough one.

No comments: