| SPECIAL
REPORTS: ARGENTINA |
|
|
|
An
Airline for a Dollar
Viviana
Alonso
BUENOS AIRES, (IPS) - The sale of the
state-owned Aerolíneas Argentinas
(AA) to Spain's Iberia for a symbolic
1.54 dollars in 1990 has come under
heavy criticism ever since, but
President Néstor Kirchner, who took
office two months ago and has moved
quickly to make big changes in some
areas, will leave the matter alone --
for now.
”The privatisation of AA (Aerolíneas
Argentinas) was the first black
stain” in the process of dismantling
the state that was carried out by
former president Carlos Menem
(1989-1999), says Eduardo Curia, who
served as Menem's economy minister for
five months, until he left due to
political differences, and is now
director of the Centre for Social and
Economic Analysis.
In the 1990s, Argentina took in 23.85
billion dollars in revenues for the
sales of state entities, but it has
been a process plagued by
irregularities.
The Menem government lauded the
virtues of the private sector, but AA
was sold to a state-owned and
deficit-prone company, which in the
year of the transaction lost 150
million dollars.
And meanwhile, the Spanish government
sought to privatise Iberia.
”In the early 1990s, Spain decided
to sell off Iberia, but realised that
for the operation to be successful, it
first had to get the company organised,
capitalise it and give it some
projection,” Edgardo Carranza, an
airline expert and former legislative
adviser, told IPS.
Using Iberia, Spain sought to ”enter
Latin America through the purchase of
local companies, as occurred with
Venezuela's Viasa and with AA,” he
said.
”The basic goal was to transfer the
resources of these companies to
Iberia, and that was made possible by
the complicity of Argentine officials
and by systematically violating the
terms of the contracts,” said
Carranza.
In December 1989, Menem signed a
decree authorising the sale of 85
percent of AA, leaving 10 percent for
the airline employees associations and
five percent for the state, with the
condition that at least 51 percent of
the shares would remain in Argentine
hands.
The only bidder in the process was the
consortium led by Iberia. In July
1990, when the bidding closed, Alberto
González Arzac, the Justice
Ministry's Inspector General, issued
an objection to the conditions of the
airline privatisation, calling into
doubt the financial solvency of the
interested consortium.
It is risky to transfer a company
”without conducting an inventory,
without an appraisal, at giveaway
prices and with an easy payment
plan,” to a group that does not hold
sufficient capital, he warned.
Based on González Arzac's report, a
motion was filed to stop the sale, and
was accepted Jul. 13, but the
executive branch appealed to the
Supreme Court of Justice against that
decision.
The Supreme Court -- expanded in April
1990 from five to nine members, with
new justices ensuring a pro-Menem
majority -- gave the green light to
the privatisation within a matter of
hours.
That same day, Jul. 13, 1990, the
government announced that the
Iberia-led consortium had qualified to
make the purchase.
The Spanish firm took over Aerolíneas
Argentinas having offered 260 million
dollars, half to be paid immediately
and the rest in 10 years, and
committed to issuing 1.6 billion
dollars in debt papers.
At the time of the transfer, the
Argentine state absorbed the previous
AA liability of 860 million dollars
and handed over the company debt free.
Six months later, when the first
period in Iberia's hands concluded,
the airline had accumulated debt of
920 million dollars.
And then the buyers began asking for
authorisation to make reduced payments
and extensions of deadlines, launching
a decade of continuous negotiations
with the Argentine government.
Immediately after the purchase, Iberia
mortgaged the AA aircraft in order to
obtain credits to make the initial
payments.
The governmental Public Enterprise
Trusteeship, in charge of safeguarding
the interests of public entities,
declared that the transaction Iberia
made was illegal and that the
Argentine state could rescind the
contract.
But the Menem government argued that
the Trusteeship had no authority over
the matter.
A 1994 presidential decree established
that any firm based in Argentina could
obtain control of Aerolíneas SA --
the name of the privatised AA -- and
the state renounced its right to veto
operational matters.
That allowed Interinvest to emerge, a
group founded by two board members of
Aerolíneas SA (ARSA), who also served
as Iberia lawyers.
”Iberia controlled Interinvest, and
Interinvest went on to control 92.1
percent of ARSA and 90 percent of
Austral-Cielos del Sur (a smaller
Argentine airline),” even though it
was illegal for the same group to hold
the majority share in the two
companies, pointed out airline expert
Carranza.
Later, with the privatisation of
Iberia itself underway, Spain's
governmental partnership agency SEPI
took charge of AA, but there was no
improvement in the company's financial
situation.
Airline employee conflicts
intensified, the debt grew and the
assets of AA gradually disappeared,
Carranza said.
AA's Boeing 707 passenger aircraft
”were sold in a symbolic transaction
to Iberia for one dollar and 54 cents.
Years later, they continue to fly for
the privatised company, but AA has to
pay to use them,” says a report on
Argentina written by Eric Toussaint,
of the Brussels-based Committee for
Cancellation of the Third World Debt.
>From 1990 to 2000, Iberia did
nothing to update the air-fleet,
purchasing only older aircraft. One, a
DC-9 transferred to Austral-Cielos del
Sur, also controlled by the Spanish
firm, crashed on Oct. 10, 1977, 32 km
from the western Uruguayan city of
Fray Bentos, killing 74 people.
It was the worst accident in Argentine
airline history. According to an
investigation entrusted to a
commission of 30 Uruguayan experts,
the 29-year-old plane crashed due to
both human error and technical
failure.
In reaction to the tragedy, the
Association of Aeronautical Technical
Personnel and the Association of
Airline Pilots accused the Austral
company of ”putting profits before
safety.”
Iberia also failed to expand AA
routes, one of the aims of the
privatisation included in the bidding
terms.
Iberia instead shut down 40 profitable
routes, including flights from Buenos
Aires to Mexico City and to Los
Angeles. Now the Spanish airline
operates those routes, as well as all
of AA's former destinations in Europe.
But despite the problems surrounding
the AA-Iberia deal, the airlines are
not included in the Kirchner
government's Jul. 4 Decree 311, which
created a commission to study and
renegotiate the contracts of the
privatised companies that handle
water, electricity, natural gas and
telephone services, as well as those
that run subways, railroads, highways,
ports, postal services and airports.
Aerolíneas Argentinas was founded 50
years ago. In 1957 it had flights to
17 countries and operated offices in
72 cities in Europe and the United
States. In the 1980s it inaugurated
trans-Antarctic routes and was the
fifth safest airline in the world. In
1989, the year before privatisation,
it owned 28 passenger aircraft.
Twelve years on, AA owned just one
airplane, while renting 43 others.
From 1989 to 2001 the airline's staff
was slashed from 11,500 to 6,500
employees.
But the airline controversy did not
end there.
In 2001 the Argentine congress set up
an investigative commission and the
special prosecutor for tax and
contraband filed a lawsuit against
ARSA, charging ”economic
subversion”.
”Within days, SEPI announced that it
would sell off its share in
Interinvest,” said Carranza.
By 2002, AA had accumulated liability
of 605 million dollars. At the end of
December an agreement was reached with
the creditors for repayment of 40
percent of the debt in three years.
But two creditors objected to that
accord. The Román company, which
accused AA of ”fraudulent
exaggeration of its liabilities”,
and the International Air Transport
Association (IATA).
IATA requested an investigation to
determine whether AA had illegally
purchased its own debt in order to
have a majority holding among the
creditors and force approval of the
agreement.
On another front, a criminal
investigation is underway for alleged
fraudulent administration of the
airline.
According to González Arzac, the
justice ministry's inspector, the
privatisation of AA is ”a shameless
history that reveals the lack of
decency of certain individuals from
Spain and from Argentina.
Aerolíneas Argentinas did not respond
to IPS requests for comment.
Email
this page to a Friend
|
|
|
|
|
