BUENOS AIRES (Dow Jones)–State-owned Aerolineas Argentinas plans to shift its focus to domestic and regional flights rather than long haul international trips as it struggles to deal with high costs, a top executive said Monday.
The company will conduct a full review of all flights and employee work hours, putting an end «to absurd union demands,» Aerolineas president Mariano Recalde said in a televised press conference.
Plans to renovate the fleet will also be moved up and a number of older aircraft withdrawn from service early next year, including the retirement of the company’s aging 747s next February, Recalde said.
Speaking at the same press conference, Planning Minister Julio De Vido said Aerolineas will put greater focus on destinations within South America, such as Brazil, Peru, Venezuela and Colombia.
«It is our objective to review all international long haul destinations–the U.S., Europe, Oceania–that are the company’s biggest loss making markets, which explain 40% of its losses,» the minister said.
The changes at Aerolineas come amid a push by the government to trim the hefty subsidies for water, gas, electricity and public transportation which have been a mainstay of President Cristina Kirchner’s government.
According to ASAP, a non-governmental organization dedicated to improving public-sector finances, the government’s 2012 budget proposal earmarks 75.3 billion pesos ($17.5 billion) for subsidies–about 15% of total projected spending.
Faced with a tightening of the fiscal surplus, earlier this month the government said it would eliminate the subsidies for many industries and wealthier residents.
Argentina’s government seized Aerolineas Argentinas from Spanish tourism company Grupo Marsans in 2009. The government accused Marsans of running the company into the ground and failing to meet its investment obligations.
Aerolineas has invested heavil犀利士
y in updating its fleet since the government takeover, and now has 65 planes in operation, up from 23 in June 2008.
In August, the company emerged from bankruptcy after a decade of court supervision. But the country’s flagship carrier remains a ward of the state. Aerolineas losses narrowed to $586 million last year, from $943 million in 2009. For 2011, the company’s loss is expected to be similar to last year’s, Recalde said.
Aerolineas’ recovery has been dogged by frequent strikes by militant unions as well as periodic eruptions by Chile’s Puyehue volcano that have forced the company to cancel more than 3,500 flights.
The volcano has been steadily spewing corrosive ash since early June that has sporadically shut down air travel across the southern half of South America.
Despite the challenges, the company has pushed forward with a number of agreements to expand it’s reach.
Aerolineas Argentinas plans to add 38 new destinations by joining the SkyTeam alliance whose members include Delta Airlines (DAL) and Air France-KLM (AFLYY, AF.FR).
In September, the company signed a memorandum of understanding to implement a codeshare agreement with Brazil’s second-largest carrier, Gol Linhas Aereas Inteligentes (GOLL4.BR, GOL).
-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com
–Ken Parks contributed to this article.
Source: http://online.wsj.com