Friday, September 14th 2012 - 05:18 UTC

Auction of Pluna’s Bombardier aircraft collapses: terms “non attractive” and “non viable”

Uruguay’s attempt to auction the bankrupt national airline Pluna aircraft collapsed because none of the groups that showed an initial interest turned up arguing that the 136 million dollars for the seven Bombardier CRJ900 NextGen was “not attractive” and considered the whole business deal “non viable”.

A next auction is scheduled for October first at Carrasco airport

Minister Pintado said the auction was suspended to ensure “transparency”

The Uruguayan government suspended until October first the auction that was scheduled for Wednesday at the Carrasco International airport when three of the groups said they had lost interest.

In a heated press conference the Minister of Transport and Public Works Enique Pintado said the auction had been suspended to give the interested parties more time and refused to identify them, when they had already been published in the morning papers.

Pintado said he would only answer what he thought was relevant for the operation and journalists accused him of “not telling the truth” and trying to mislead them by saying the auction would take place “under the same conditions and terms”..

The three interested groups basically reported that the price demanded, 136 million dollars which is equivalent to the purchase loan the Uruguayan government is the guarantee before the Canadian Scotia Bank, is “too high” and “far from market values”. Further more among the conditions of the sale is that part of the Pluna staff left redundant must be re-contracted by the new owners of the aircraft, which is also unacceptable for those interested.

One of the groups from Argentina, Sol airlines said that “it was impossible to draft a viable economic plan under the current conditions with the assets offered, and compatible with what Uruguay represents for the region”

However in a letter to Minister Pintado Sol airline promised to continue expanding connectivity in the area between Montevideo, Buenos Aires and Rosario and in coming months would add the resort of Punta del Este.

Another Argentine group BQB which runs the ferries between Montevideo and Buenos Aires and has moved to the air business with a few links in the region, said “conditions are not attractive”, despite having paid 5.000 dollars for the terms of the auction, which also enabled it to inspect the aircraft.

Conviasa, the Venezuelan air carrier belonging to the government was allegedly also interested but finally did not turn up. Apparently the operation involving the Venezuelan airline will be addressed at “the highest level”, meaning presidents Jose Mujica and Hugo Chavez. But since Chavez is running for re-election October 7, not much can be done.

A fourth group, MacAir Jet belonging to the Argentine entrepreneur Francisco Macri apparently indicated it would be present at the October auction. But MacAir Jet basically does private and charter flights and when Pluna collapsed and was declared bankrupt last July, the group said it was prepared to manage the airline with a severe cost-cutting program, but never received a reply.

Minister Pintado alleged that only three interested parties was “not enough” to ensure transparency and therefore the suspension until October, but under the same conditions and terms.

However according to the law that opened the way for the auctioning of Pluna’s assets if there are no interested parties in the first call, in the second, the base price for the seven aircraft would be 100 million dollars.

According to aviation experts the 19 million dollars for each Bombardier (totalling 7 and 136 million dollars) is way out of price with market operations for such aircraft in the range of 11 to 12 million dollars.

Pluna, Uruguay’s flag carrier was started in 1936 and at its latest experience beginning in 2007 it was jointly managed by an Argentine private group which had a majority stake of 75%. But the private group alleged it could not compete with regional subsidized airlines and accumulated debts of 380 million dollars plus a 28 million dollars fuel bill. Besides the Uruguayan state is the guarantor of the Bombardier aircraft purchase.

Faced with this situation and when the Argentine group Leadgate threatened with abandoning the airline if there wasn’t further financial support from the government, the administration of President Jose Mujica declared the dissolution of the company and the sale of all its assets.

Following the collapse of Wednesday’s auction and not many encouraging prospects for October, President Mujica speaking with the press said he agreed to the dissolution of Pluna because his administration was not prepared to grant the airline an annual subsidy of 25 million dollars.

Regarding the possibility of having Pluna take off again with the State as partner and the redundant staff managing the airline, Mujica said there is only one problem: “who’s going to put the money to get the airline flying again?”

 

7 comments Feed

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1 ChrisR (#) Sep 14th, 2012 - 11:04 am Report abuse
Well I hate to say 'I told you so', but I did.

I still think a realistic asking price is USD 80 million, assuming adequate maintenance records and no fatal damage reports (to the airframes).

The buffoon running the sale needs to be replaced with someone a little more savvy and worldly-wise.

Three bidders cannot give transparency? WTF is he worried about, a concert party?

If they persist with the stupid way they are attempting this sale these aircraft will continue to deteriorate and lose even more value.

At least Pepe seems to be holding his ground on getting rid of the turkey.
2 yankeeboy (#) Sep 14th, 2012 - 01:05 pm Report abuse
Considering Uruguay's main business is tourism they should make it really cheap to get there. Free landing at the airports with huge incentives to make Montevideo a hub. They should consider Iceland Air as a model, they offer a 3 day stopover for free on the way to EU from USA with cheap flights from the East Coast USA.
3 British_Kirchnerist (#) Sep 15th, 2012 - 01:04 am Report abuse
What a fiasco, maybe they shouldn't try to privatise it at all?!
4 ChrisR (#) Sep 15th, 2012 - 12:22 pm Report abuse
3 BSK

“maybe they shouldn't try to privatise it at all?!” So I take it they should keep on running it with the government paying the bills?

You REALLY don't get it at all do you?

We are a country of 3.5 M! That's it.

There are more people employed by the government than work in the real, productive taxpaying economy and people like me who have retired but pay tax on the investments in the country itself.

Please remember that the government cannot earn money they only spend tax receipts.

SO, the money we real taxpayers have paid to the government they in turn give their employees in 'pay' which they then 'tax' them. But the employees cannot produce anything to grow the economy. Have you got the implications of this?

Pluna was consistently losing many tens of millions in US$ per year and would go on to do so (plus rises due to fuel and wages) for all time. For what? People like me to 'fly the flag' when we went on holiday? No-one else in the country who works at a 'normal' job would ever earn enough money to buy a ticket.

AND you want to make it so the poor sods who can't afford to fly on it have to pay even more taxes so the people like me can!

FFS start thinking about something else other than TMBOA and start to UNDERSTAND these countries you seem to love so much but have never been to, never paid taxes there and have NO IDEA OF WHAT THEY ARE REALLY LIKE.
5 Simon68 (#) Sep 15th, 2012 - 04:04 pm Report abuse
BK is an Argentine troll!!!!!!
6 UruguayBR (#) Sep 18th, 2012 - 02:10 am Report abuse
uruguaybr.com/2012/09/15/pluna-auction-news-experts-are-pessimistic-about-postponed-auctions-chances-for-success/
7 ChrisR (#) Sep 18th, 2012 - 11:55 am Report abuse
6 UruguayBR

It is as I said in my original post, when this first came to light.

Unfortunately, much as I love Uruguay and the people, the government is loaded with immature (in the business sense) persons who just cannot understand that just because they say it, it does not make it work in the real world.

A classic example is the state owned companies are showing forward losses next year of US$1.14 billion! And with the exception of ANCAP (who have other companies like Petrobras and Esso - but they have to sell at the government set price) they are monopolies.

Monopolies, especially government ones, are renowned the world over for the worst of everything: extremely bad service, higher than necessary prices and all the foresight of a plank of wood.

And why should they care? No-one is going to get the sack unless they deliberately set fire to the premises or something equally ludicrous.

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