Argentina’s business-friendly government may be prepared to shut down state-run airline Aerolineas Argentinas as the country battles to reduce a huge budget deficit. The news emerged as unions representing workers at the airline called for a national general strike in opposition to the rumoured plans by the Mauricio Macri administration.
A couple of weeks ago, the International Monetary Fund (IMF) agreed a $56.3 billion USD funding agreement for the debt-ridden country but it came with demands for the Argentine government to deepen cutbacks, reduce spending and increase taxes.
Aerolineas Argentinas presented a three-year strategic transformation plan in October as part of its efforts to turn the company around. The plan was created by the airline’s new President, Luis Malvido, the former chief executive for Telefonica’s South American operations.
The latest developments, however, could prove to be a lot more radical than what had been originally proposed.
Workers at Aerolineas Argentinas and its sister airline, Austral have been told that they will not receive a pay rise as previously agreed and salaries will be frozen for around three months. Inflation in Argentina is currently expected to peak at 40% by January 2019 before falling throughout the rest of the year.
A decision on the very future of the airline is expected to be made by April 2018, with all options currently on the table.
In 2017, Aerolineas Argentinas received $170 million in government subsidies but the market-friendly Macri administration wants to reduce state funding to zero by next year.
The Argentine aviation industry is currently experiencing a transformation after the authorities opened up the market to competitors and did away with minimum fare rules that made air travel all but unaffordable for the majority of the population.
In the last few weeks, the low-cost airline Norwegian began its own operations in Argentina using a fleet of brand new Boeing 737 aircraft. The carrier expects to expand rapidly over the next few years. Home grown discounter Flybondi is also set for a big expansion on the back of efforts to liberalise the market.
According to figures from the International Air Transport Association (IATA), the aviation industry currently supports over 300,000 jobs in Argentina and contributes something in the region of 1.7% of national gross domestic product.