Javier Milei has advocated selling the company and even the firm's CEO has said that several international airlines have expressed interest.
Argentina's state-run airline Aerolineas Argentinas is slimming down ahead of a possible sale, shedding 13 percent of its workforce, cutting money-losing domestic routes and even eliminating snacks once available to passengers, according to sources and documents seen by Reuters .
The cuts, many of whose details have not been previously disclosed, are part of a covert attempt to reduce the airline's burden on the state and attract private investment. The campaign is going ahead, even though plans by libertarian President Javier Milei to privatise the company have sparked opposition.
The airline, in Argentina's blue-and-white livery, is an important test of Milei's pro-market reforms, which are taking South America's second-largest economy in a very different direction after years of big government. They have improved state finances but slowed economic growth and fueled poverty.
Reuters spoke to 10 company executives, officials, pilots, airline workers and union members, and saw a memo on plans to streamline the airline for sale.
The boost led to successful operating results for Aerolíneas in 2024, a senior company source said ahead of the airline's full-year results next week. Part of that reflects the double-digit headcount reductions noted in the earlier document seen by Reuters.
"Our job is to put (Aerolíneas) in order," the senior source said, adding that the airline aimed to operate more like its private counterparts.
"That way, when the time comes and the government allows its sale, the company will be more attractive."
In July, Aerolíneas made a profit for the first time in seven years, according to data shared with Reuters.
Milei, an unabashed economist, took office in late 2023, promising to shake up Argentina's subsidy-laden economy with "chainsaw" cuts.
He has faced resistance from Congress to fully privatising Aerolíneas, but is determined to push ahead with his plans. His government has threatened to close the airline if it fails to privatise it.
"Either it will be closed, to reduce the deficit, or it will be privatised, but it will not be in the hands of the government," Milei told local radio in November.
The administration says the airline has robbed public coffers of $8 billion since 2008, when it returned to state hands after a previous privatization in the early 1990s under Milei's idol, then-President Carlos Menem.
The transportation ministry deferred comment to Aerolíneas, which did not respond to requests for comment.
WORK IS OUR ONLY WEAPON
The process of streamlining the company involves cutting loss-making routes, freezing wages, offering buyback programs and getting rid of contract workers, six airline employees told Reuters. Even a modest food offering for passengers faces the chopping block.
The airline has cut back on its onboard snack options, saving the company more than $500,000 a year, the senior airline source said, as the company took a leaf out of American Airlines, which famously cut an olive from every salad served in first class in the 1980s to cut costs.
The airline now offers just one dessert in business class and has eliminated a cereal bar for economy class passengers, the senior company source added.
Unions and Milei’s political opponents have hit back, with protests at major airports wreaking havoc on air transport in recent months, leading to flight cancellations and delays. In December, the opposition governor of Buenos Aires province said he would oppose any attempt at privatisation.
"Our work is the only weapon we have," said veteran Aerolíneas pilot Juan Pablo Mazzieri, who sports a tattoo of the airline's logo, an Andean condor, on his shoulder. "We don't like to do it, but we're going to cause delays and cancellations."
Milei says the airline needs to be more competitive. His administration had sought to deregulate the sector, allowing low-cost carriers to increase their operations and to push for an "open skies" policy to allow foreign competitors into the market.
COURTING SUITIOS
Milei has advocated selling Aerolíneas in one go. In fact, the company's general manager, Fabián Lombardo, told local radio that several international airlines had expressed interest. So far, those talks have remained informal, the sources said.
The only contender that has publicly declared its interest is the holding company Abra Group, which controls Colombia's Avianca and Brazil's Gol.
Abra is still conducting due diligence and it remains unclear what an acquisition of Aerolíneas would look like, Abra Chief Commercial Officer Joe Mohan said at an industry conference in Dallas in November.
Aerolíneas could be a tough sell, analysts warned.
"It would be easier for someone to come in with a percentage," the senior Aerolineas source said, citing plans by German carrier Lufthansa to acquire a 41% stake in Italian state-owned carrier ITA.
Aerolineas still needs to bring in banks and advisers, the source said, because it needs more clarity on the government's plan.
Milei's "Plan B" could be to sell the airline to its employees, freeing himself from both the financial headache of the company and its workers, whom he considers combative. Aerolíneas claims that labor disputes have cost it millions of dollars.
The company has canceled employee benefits such as paid commuting time, free flights, dollar bonuses and extra vacations, all "at the expense of poor Argentines," according to the government.
Several union leaders, however, say the workers' takeover of the company was a failure.
Unions argue that Aerolíneas serves a social purpose beyond its bottom line, in a country that is five times the size of France and stretches from Antarctica to the northern rainforest. Its cities are far apart and transport links are limited.
Since the start of the cuts, which included a government subsidy on airline tickets, domestic travel in Argentina has fallen by 9%, the data shows.
"We're seeing almost half as many flights as we did a year ago," said Marcelo Austi, an Aerolíneas agent at Buenos Aires' Aeroparque airport. "It's a huge difference."
