Chilean airline threatens to drop domestic flightsThursday, August 22, 2013
LAN fighting eviction from BA City airport
Chilean airline threatens to drop domestic flights after gov’t takes away hangar
LAN Argentina, part of the LATAM Airlines group, threatened yesterday to stop operating all domestic flights in the country due to an eviction order from the government on its Jorge Newbery Metropolitan Airport hangar.
The airline also announced it would seek a court injunction to block the decision.
LAN Argentina said it has invested US$5 million in the maintenance hangar at Aeroparque Jorge Newbery, and pays US$20,000 a month in rent according to a contract that runs through 2023.
The National Airport Agency (ORSNA) sent the order — signed by its head Gustavo Lipovich — on Tuesday night to withdraw from the hangar in 10 days, the company said.
The airport regulator’s eviction notice does not explain the state takeover other than declaring it to be “in the national interest.”
The Herald repeatedly tried to obtain comment from ORSNA yesterday, but despite promises that a statement was forthcoming, none was issued by press time.
A bilateral commercial dispute between the Fernández de Kirchner administration and the Andean country could thus be in the works, with a previously scheduled bilateral meeting between Foreign Minister Héctor Timerman and his Chilean counterpart in Santiago likely to be dominated by this issue.
Chilean President Sebastián Piñera is no stranger to LAN, having once owned 26 percent of the company, of which he was the chairman of the board until 2009, when he left to run for president. He sold his shares to business partners before taking office, and is expected to intercede in their favour.
The ORSNA notice sent to LAN claims the government offered to help move LAN’s domestic flights to Argentina’s main international airport in the Buenos Aires suburb of Ezeiza, an offer it said the company has refused.
If LAN stops domestic flights from the Metropolitan Airport, the money-bleeding state airline Aerolíneas Argentinas would be free to operate without its toughest competitor.
“We’ll go to the courts to enforce our rights,” Agustín Agraz, the company’s spokesman, said, adding that the eviction order would make it impossible to maintain the company’s 10 jets that currently fly within Argentina, and put 1,500 employees out of work.
Agraz spoke of communication breakdown with authorities: “Unfortunately in recent months, not a single government official responsible for Argentine airport policy has answered our phone calls. The only person who had answered us was the president, who encouraged us to invest here and create jobs.”
“We will evaluate taking every legal action necessary to (uphold) our contract,” he said, adding that international operations would not be affected.
The government’s measure is the latest salvo in a long-running political spat that has seen LATAM’s regional ambitions collide with Argentina’s protectionist policies.
In 2012, LAN Argentina had about 32 percent of domestic market share to state-owned Aerolíneas Argentina’s 66.5 percent. Around 2.3 million passengers flew with LAN Argentina last year, according to LATAM data.
The incident instantly caused shares to drop six percent, with investors frightened by a move that could undermine a market that accounts for 11 percent of the company’s profits.
Chilean Senator Hernán Lerrain was one of several politicians to Tweet about the development: “The attitude of the Argentine government toward LAN is of frank persecution. In ongoing processes of integration, this and local protectionism contradict its spirit.”
“LAN had a privileged position that it did not deserve, and now it has started to lose it,” Aerolíneas Argentinas head Mariano Recalde said amid the controversy.
Recalde claimed, for instance, that LAN received special treatment from the Intercargo ramp company, which is paid under a set tariff by the state.
“There was a single company that had a 40 percent discount on that tariff and it was LAN. Eventually the state decided that all airlines pay the same rate and that was translated by the media into an attack or boycott against LAN,” Recalde said.
In the face of LAN’s withdrawal from the Argentine market, Recalde said the decision from the “state, airports and the Civil Aviation Administration is to give all airlines fair treatment in general according to their size, input and connectivity.”
He admitted that “Aerolíneas Argentinas has been given a position of priority because it is Argentina’s airline, the airline that connects 35 cities in the country and not only the most profitable destinations,” according to a system of “proportional distribution.” Nonetheless, Recalde insisted he “doesn’t not think the conditions are present for (LAN to) leave the country.”
Union threatens strike
The Aeronautic Technical Personnel Association (APTA), the union representing airline cabin staff and technicians, warned that it would use “all union and legal means” available if LAN ended up cutting jobs because of the government’s decision to remove its Metropolitan airport hangar.
APTA Secretary General Ricardo Cirielli urged airport authorities to revise their decision: “ORSNA’s resolution has no political nor technical support and only serves to favour La Cámpora,” the Kirchnerite youth grouping said to run the airline.
The union said that since 2010, LAN “has been the object of systematic persecution by different state organs and businesses to make things difficult for it and cause its services to deteriorate by raising costs.”
—Herald with Reuters, AP, DyN