Aerolíneas Argentinas (AR, Buenos Aires Jorge Newbery) may receive USD880 million in state subsidies if it is to survive for the rest of 2020, and it may not even break even for another seven years.
The state-owned airline’s budget shortfalls were about USD680 million last year, and they will persist until demand recovers, which is not expected until 2022, president Luis Pablo Ceriani told Bloomberg on May 31, adding that profitability probably won't come for another five years after that.
“We’re planning to curb structural losses in a sustained way from 2022 onwards. That’s the reasonable horizon in this situation,” he said.
Ceriani said he hoped the carrier's eventual recovery would be aided by adding widebody cargo aircraft, to mainly fly to and from China and the US. Before that, it will merge with its subsidiary Austral (Buenos Aires Jorge Newbery) as part of a plan to bring USD100 million in savings over three years.
Cash-strapped Argentina officially entered into default on May 22 - its ninth sovereign debt default - after failing to make a USD500 million interest payment on foreign debt. Its flag carrier has depended on subsidies since being nationalised in 2008, an issue exacerbated by the country's longstanding economic problems.
To fight the coronavirus pandemic, the country has halted commercial flights until September 1. Aerolíneas is committed, Ceriani said, to not laying off any of its 12,000 employees. But a source said that the carrier would start negotiations with unions to suspend the contracts of 7,500 of its employees for two months until August. Reuters put that figure at 8,000.
The airline is also in “advanced negotiations” to restructure payments to Brazil’s state-owned development bank (Banco Nacional de Desarrollo Económico y Social - BNDES) as well as Banco de la Nación Argentina, it said on May 31.
