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”.
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?”