MercoPress. South Atlantic News Agency

Argentine Congress backs expropriation of flag air carrier

The Argentine Congress on Wednesday backed a government plan to expropriate Argentina's flag carrier and biggest airline after months of negotiations with the company's Spanish owners broke down.

The Senate gave final approval to seize Aerolineas Argentinas from Spanish tourism group Marsans which anticipated it would challenge the decision in international arbitration. The takeover is the latest by Argentina's populist government of Cristina Fernandez de Kirchner (and previous of her husband Nestor Kirchner) to increase state control or local investor participation in companies considered key economic sectors, many of which were privatized during the 1990s. "This is a joyous day," said Ariel Basteiro, a congressman and former airline union leader as dozens of Aerolineas workers celebrated the vote's outcome. Marsans agreed in July to sell Aerolineas and its Austral subsidiary to the Argentine government, but talks over the company's value collapsed after audits determined widely disparate values for the company. The government has accused Marsans of mismanaging the airline, a charge the company denies. Aerolineas has been plagued by labour disputes and flight cancellations for months, plus frozen air rates for several years, and the government says it has run up debts of nearly 900 million US dollars. Aerolineas and Austral operate about 80% of domestic flights in Argentina. The Argentine affiliate of Chile's LAN Airlines has the other 20%. Senator Marcelo Guinle of the ruling Peronist party said the takeover was the "only way to ensure the airline keeps flying." The government has spent around 300 million USD to keep Aerolineas running since July, according to local media, and a national appraisals court estimated the company's liabilities at 832 million USD. During the Wednesday Senate debate it was revealed that Aerolineas was losing 27 million pesos (approximately 8 million USD) a month. With global economic downturn deepening, airline traffic is forecast to decline worldwide thus forcing the government to further support the troubled airline. The Kirchners government decision to seize the airlines, followed by a move to nationalize Argentina's private pension funds last month have heightened worries about property rights in the country and scared investors. Aerolineas was on the verge of bankruptcy in 2001 when Marsans bought it from a group controlled by the Spanish government. Once a state-owned carrier, it was privatized in the early nineties.