MercoPress. South Atlantic News Agency

LAN and Argentina discuss non profitable lines

The Argentine government and Lan Chile's affiliate in Argentina which begins operations next month in the domestic market can't agree on the coverage of some non profitable lines such as flights to Rio Gallegos.

According to Argentine sources the initial verbal agreement was that Lan's affiliate would fly to all Argentine provinces including non profitable destinations such as San Juan, La Rioja, Jujuy, Bahia Blanca and Rio Gallegos. Chileans disagree.

"We haven't reached an agreement on the routes; because we're a private company they can't force us to social subsidies. What they can do is grant incentives for those flights", said a high ranking official from Lan's office in Buenos Aires. "Other private Argentine companies don't do it, American Falcon or Aerolineas, so why should we? With incentives we would consider it ", added the source.

However Argentine Transport Under-Secretary insists that "this was the original agreement. They said they would cover all the lines with non regular flights to destinations such as San Juan, Rio Negro and Rio Gallegos in the coming months. Currently all flights are full booked so there should be no debate on profitability".

Lan Argentina begins operations next June 8 with three daily flights to Cordoba and two to Mendoza in Boeings 737/200. July 17 there will be an additional flight to Cordoba and the Buenos Aires-Bariloche line will be officially inaugurated.

In 2005 Lan Argentina affiliate plans to invest 29 million US dollars and fly to 15 destinations, (half a million passengers by December 31/2005) which should represent 14% of all domestic traffic currently 80% under Aerolineas control. Lan also had to absorb the staff from three Argentine domestic bankrupt airlines, LAPA, Dinar and Aerovip.

The company expects a turnover of 55 million US dollars this year and 250 million in 2006.

"We'll be loosing money this year, but by 2007 we should be making a profit", revealed one of the top managers of Lan Argentina who added that if local partners, Jorge Perez Alati and Manuel Benites who currently hold 51% of shares can't boost further investments "we'll call in more partners".

Meantime in Lima the Peruvian government named a special prosecutor to begin legal actions against Lan Peru (Lan's Peruvian affiliate) for airing in its aircrafts videos with "denigrating" images of Peru. Lan Peru aired videos, rented in United States, showing Lima covered in garbage, dirty and dangerous streets with thugs and thieves, Indians urinating in public squares, chaotic traffic and deplorable hotels.

According to the presidential instruction the special prosecutor, a former ombudsman, will have full support from the "ministerial cabinet", ministries and legal departments.

Lan Peru which dominates 80% of the country's air domestic market apologized for the "involuntary" mistake.