ECONOMY-ARGENTINA: Airline Workers’ Union to Fight Restructuring

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jun 13 2000 (IPS) - The unions of employees of Aerolíneas Argentinas, which was privatised 10 years ago debt-free and is on the brink of bankruptcy today, rejected an adjustment plan Tuesday presented by the Spanish consortium running the company.

“We cannot accept that the same firm that gutted the company and left it on the verge of going under now decides to reduce wages and dismiss personnel,” Ricardo Cirielli, secretary-general of the union of aeronautic technical staff, protested Tuesday after hearing the restructuring plan announced in Madrid.

Aerolíneas pilot Edgardo Ferreira, with the Association of Airline Pilots, said the company “was handed over in 1990 with 626 million dollars in assets and without debts, and now it has been left with almost no assets, while it owes one billion dollars,” he complained.

The unions plan to file legal charges for the gutting of the company, and to take measures like work stoppages in case the restructuring is put into effect without their support. “This company is a bottomless barrel,” said Ferreira. “It doesn’t make sense to continue restructuring and infusing it with capital if they don’t know how to administer it.”

The restructuring plan aims to cut wages by 20 percent on average, and offer the option of early retirement to around 1,500 of the airline’s 5,400 employees, a total that does not include the 3,000 employees of satellite companies — or the 5,000 already laid off in the past 10 years.

The privatisation of Aerolíneas Argentinas was problematic from the very start. Former president Carlos Menem (1989-99) based his programme of slimming the state on the selling off of public enterprises. But the transfer of the airline came as a surprise, as it was one of the few state-run companies that did not generate losses.

The sale was pushed through fast. The Supreme Court of Justice, suspected at the time of backing Menem, knocked down all of the hurdles standing in the way of the privatisation, despite the resistance mounted by legislators demanding a legal review of the negotiations.

In the midst of a political scandal that also spattered the trade unions, the company was sold to the only bidder, a consortium headed by Iberia, Spain’s public airline. The Argentine state conserved a five percent stake, and the workers 10 percent.

Iberia paid its share by getting into debt with the company. An Argentine firm — the owner of the domestic airline Austral –was part of the consortium, presenting itself as payment. But it pulled out shortly after the deal went through.

Aerolíneas Argentinas became a lossmaker a year after it was privatised. By the mid-1990s, staff had been slashed by 53 percent, a large part of the fleet had been sold off, and air routes, repair shops and other services had been ceded, sold or outsourced to other companies.

The state was forced to “re-nationalise” the company by increasing its stake to 43 percent of shares, in order to infuse the airline with new capital.

But that did not suffice. And today, when the state’s share stands at five percent once again and a number of investors are involved in the business, the company is going broke.

Aerolínas Argentinas, which used to fly to 26 international destinations, today flies only to Madrid, Miami and a few cities in Latin America. The rest of the routes were yielded to competitors. Cargo and ticket reservation services were outsourced, and flight simulators, repair shops and hangars were sold.

Ferreira pointed out that buildings owned by Aerolíneas Argentinas in Buenos Aires, Rome, Tokyo and other destinations, as well as its training centres, were also sold, and that much of the company’s fleet was replaced by leased planes. “They only have one Jumbo left,” he said.

Despite all the cuts — which also affected domestic flights — the company sold debt-free 10 years ago now owes over one billion dollars, and threatens to go under if the restructuring plan, drawn up by the same consultancy firm that designed the downsizing of Iberia, is not accepted.

The airline’s losses amounted to 50 million dollars in 1998, and to 240 million in 1999. Revenues are falling steadily, and the company is swiftly losing market share.

The restructuring plan also entails an infusion of 650 million dollars in capital by investors.

Iberia now holds a smaller stake in Aerolíneas (its share has shrunk from 30 to 10 percent). Other investors are American Airlines, Merrill Lynch, and the Spanish state-owned group SEPI (Sociedad Estatal de Participaciones Industriales — in which Iberia participates).

Iberia’s performance was also poor in Venezuela, where it led the Viasa airline into bankruptcy.

Indeed, Argentine trade unions maintain that the Spanish firm’s strategy is to eliminate competitors in the region.

The Argentine government of Fernando de la Rúa, in office since December, simply presented the restructuring plan to the unions Tuesday. The state, as a partner, will have to contribute to the projected capitalisation of Aerolíneas, as will the workers, who will be held accountable for some 70 million dollars.

Ferreira complained that during Menem’s two terms in office, there was never any investigation into Aerolíneas’ balance sheets.

The unions say the gutting of the company that they predicted would happen began shortly after privatisation, although not to the present extent.

The head of the pilots union protested the wage cuts as unfair, pointing out that Iberia’s pilots earned an average of 11,000 dollars a month — with fringe benefits — compared to Aerolíneas’ salaries of 7,500 dollars.

“This plan means just more of the same,” said Alicia Castro, a parliamentary deputy of the ruling coalition and the head of the union of flight attendants and on-board staff. “With invitations to retire and other such mechanisms, the company has already sacked 5,000 employees since 1990.”

But it looks like the restructuring programme, presented as a last resort to save the company from ruin, will be pushed through in the face of all resistance — especially now that the government has committed itself to a policy of “open skies” with respect to competition from US airlines.