Gonzalo
Topic Author
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Future Of AR If The Government Runs Out Of Cash

Thu May 24, 2012 12:52 pm

It is a known fact that AR is airborne thanks to a daily injection of cash from the government, with an estimate of 2,2 million dollars every day ( around 800 millions / year ).
The Central Bank of Argentina ( BCRA ), is running out of cash, the total reserves today are estimated at 47 billion dollars, but they must pay more than half of that in credit obligations ( 10 billions ) and oil and energy ( 14 billions ) before the end of the year. They are trying desperately to keep every dollar they can inside the country with a heavy control of every transaction and forbidding the free exchange of money, but the effect of this measures in the investors ( and in the general public in Argentina ) is precisely the anxiety for take every dollar out of the country or keep it under the bed, configuring a scenario of extreme uncertainty about the future capacity of the country to keep alive the subsidies, and among the subsidized companies we have, obviously, AR.

How can AR survive if the government can´t keep the flow of money into the airline ?
Privatization again ? Definitive closure ?

What do you think ? Any hypothesis ?

Rgds.,

G.
Gear Up!!: DC-3 / EMB-110 / Fairchild-227 / Ab318-19-20-21 / B732 / B763 / B789
 
scouseflyer
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RE: Future Of AR If The Government Runs Out Of Cash

Thu May 24, 2012 1:07 pm

It's difficult to see them surviving in either of the outcomes I can think of:

1. the goverment manages to balance its books with a massive round of cost-cutting - daily cash injections to an airilne would be very high-up on the list. To survive then AR would have to operate like a true business and close unprofitable routes, ground expensive planes and cut staff costs.

2. The government runs out of cash and the whole country goes into crisis as it did ten years ago:

http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999-2002)

if that happens all bets are off
 
Byrdluvs747
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RE: Future Of AR If The Government Runs Out Of Cash

Thu May 24, 2012 10:17 pm

Quoting scouseflyer (Reply 1):
1. the goverment manages to balance its books with a massive round of cost-cutting - daily cash injections to an airilne would be very high-up on the list. To survive then AR would have to operate like a true business and close unprofitable routes, ground expensive planes and cut staff costs.

I wonder if the govt would end its discriminatory policies against 4M and allow the market to decide routes. I suspect they would continue, or get worse in order to give AR as much of an advantage as possible.

Given a truly market based environment and AR's poor management, I suspect it wouldn't take long for 4M to overtake them.
The 747: The hands who designed it were guided by god.
 
Gonzalo
Topic Author
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RE: Future Of AR If The Government Runs Out Of Cash

Fri May 25, 2012 12:49 pm

Quoting Byrdluvs747 (Reply 2):
I wonder if the govt would end its discriminatory policies against 4M and allow the market to decide routes.

Are you kidding ? The Argentinian government said out-loud, "we want a new paradigm of control". This control, ala 1984 of G. Orwell, covers every aspect of the markets ( all the markets, from cereals to airlines ), and they never, NEVER will take any action to make the things easier to 4M. I'm already surprised that they didn't "invent" some excuse to cancel the 4M operation in the country, maybe they don't have the nerve to do something like that because the common people likes the 4M service, but after YPF I have my doubts.

Rgds.
G.
Gear Up!!: DC-3 / EMB-110 / Fairchild-227 / Ab318-19-20-21 / B732 / B763 / B789
 
MaverickM11
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RE: Future Of AR If The Government Runs Out Of Cash

Fri May 25, 2012 12:52 pm

If Argentina runs out of money, they'll have bigger problems than rescuing AR, like loads of angry penniless pensioners for instance.
E pur si muove -Galileo
 
jfk777
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RE: Future Of AR If The Government Runs Out Of Cash

Fri May 25, 2012 1:56 pm

I know this has little chance of happening because Argentina will have to swallow some pride, sell it to LAN and let them make what it can be. IT can be a profitable and "proud Argentina Airline"
 
iFlyLOTs
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RE: Future Of AR If The Government Runs Out Of Cash

Fri May 25, 2012 2:38 pm

Quoting jfk777 (Reply 5):
I know this has little chance of happening because Argentina will have to swallow some pride, sell it to LAN and let them make what it can be.

Why would LAN want it? Unless the Gov't actually shuts down LAN Argentina, there is really no point for LAN to want AR, it would be a waste of money for them.
"...stay hungry, stay foolish" -Steve Jobs
 
Byrdluvs747
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RE: Future Of AR If The Government Runs Out Of Cash

Fri May 25, 2012 4:07 pm

Quoting iFlyLOTs (Reply 6):
Why would LAN want it?

Looking at AR, I can't think of anything the airline possesses that would be desirable to 4M.

Unless 4M wants to operate A340's, none of AR's fleet would be compatible. Maybe LAN would be interested in their two flight simulators or possibly some gates/ticket counters at various airports. Does AR operate their own lounges?
The 747: The hands who designed it were guided by god.
 
jfk777
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RE: Future Of AR If The Government Runs Out Of Cash

Fri May 25, 2012 5:38 pm

Quoting iFlyLOTs (Reply 6):
Why would LAN want it? Unless the Gov't actually shuts down LAN Argentina, there is really no point for LAN to want AR, it would be a waste of money for them.

There are many ways LAN could takeover AR or any other airline, Cash and stock are not the only way. Who in there right mind would pay for AR ? Not LAN. But what if the Argentine Government took all the debt and allowed employee buyouts and layoffs there may be something there. The Argentine government will one day realize that "saving" AR in a lots cause. Even if the Government's mind is 30 years behind the times eventually they will have to have a cash flow positive AR.
 
iFlyLOTs
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RE: Future Of AR If The Government Runs Out Of Cash

Fri May 25, 2012 8:58 pm

Quoting jfk777 (Reply 8):
Who in there right mind would pay for AR ? Not LAN.

  
They already have an Argentine subsidiary, LAN Argentina, which while I don't know the details of the company or how much money they're losing (or making) I think I can safely assume that it's not losing $2.2 million a day. So if the gov't runs out of money then a assume that AR is truly a lost cause, LAN won't want to touch them with a 10 foot pole
"...stay hungry, stay foolish" -Steve Jobs
 
jfk777
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RE: Future Of AR If The Government Runs Out Of Cash

Fri May 25, 2012 11:53 pm

Quoting iFlyLOTs (Reply 9):
They already have an Argentine subsidiary, LAN Argentina, which while I don't know the details of the company or how much money they're losing (or making) I think I can safely assume that it's not losing $2.2 million a day. So if the gov't runs out of money then a assume that AR is truly a lost cause, LAN won't want to touch them with a 10 foot pole

I have been quite aware of LAN Argentina for years, but they are a small fish in AR's pond. LAN's only major route outside the region is Miami - EZE. NO EZE to Madrid.
 
Byrdluvs747
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RE: Future Of AR If The Government Runs Out Of Cash

Fri May 25, 2012 11:59 pm

Quoting jfk777 (Reply 8):
But what if the Argentine Government took all the debt and allowed employee buyouts and layoffs there may be something there.

After doing more research on AR, the only thing I can see of value to 4M would be AU and its 20 E-190's. I'm sure LAN wouldn't mind getting its hands on AU's jets, but not its unions.
The 747: The hands who designed it were guided by god.
 
Gonzalo
Topic Author
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RE: Future Of AR If The Government Runs Out Of Cash

Mon May 28, 2012 11:10 pm

Another measure against the travellers, and by extension, against AR    http://news.yahoo.com/argentina-more...s-buying-us-dollars-180240507.html

I feel really sorry for the people in Argentina, it seems that they are loosing freedom day by day.

G.
Gear Up!!: DC-3 / EMB-110 / Fairchild-227 / Ab318-19-20-21 / B732 / B763 / B789
 
sciurusmdg
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RE: Future Of AR If The Government Runs Out Of Cash

Tue May 29, 2012 2:23 am

Am currently writing an article on this exact topic, if anyone has any very good theories/ideas/hypothesis then would be very interested and grateful to hear them!
 
SCL767
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RE: Future Of AR If The Government Runs Out Of Cash

Tue May 29, 2012 3:11 am

Quoting jfk777 (Reply 10):
I have been quite aware of LAN Argentina for years, but they are a small fish in AR's pond. LAN's only major route outside the region is Miami - EZE. NO EZE to Madrid.

Recently, LAN Argentina wanted to increase frequency on the EZE-MIA route but the ANAC rejected that request. LAN Argentina was also forced to move its regional flights from AEP back to EZE. However, LAN Airlines simply took over the SCL-AEP route, which operates 3x daily. Unlike AR, LAN and TAM operate actual hubs. LA/JJ operate GRU-EZE 8x daily, LAN operates SCL-EZE up to 50x weekly and LIM-EZE 3x daily, TAM will soon operate the GIG-EZE route 3x daily, etc. LAN offers pax traveling to/from COR connections via both SCL and LIM. LAN offers pax traveling to/from MDZ connections via SCL. Starting in July, LAN will increase frequency and capacity on the SCL-COR route and the SCL-MDZ route will operate 3x daily with the A-320s. LAN Argentina will offer connections to BRC via EZE starting in July for international pax, (mostly pax originating in Brazil). LAN Argentina actually had a positive Q1 due to the increase in domestic airfares; which are regulated by the government.

Quoting Byrdluvs747 (Reply 11):
I'm sure LAN wouldn't mind getting its hands on AU's jets, but not its unions.

LAN would not want AU's jets since bringing in a new type of a/c into the fleet would only increase LAN's operating costs.
 
Byrdluvs747
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Joined: Thu Jul 15, 2004 5:25 am

RE: Future Of AR If The Government Runs Out Of Cash

Tue May 29, 2012 8:22 am

Quoting Gonzalo (Reply 12):
I feel really sorry for the people in Argentina, it seems that they are loosing freedom day by day

No sympathy here. If they feel they are suffering then Argentinians need to throw crazy Christina out of office. Why are there no protests?

Quoting SCL767 (Reply 14):
LAN would not want AU's jets since bringing in a new type of a/c into the fleet would only increase LAN's operating costs.

In a post-AR environment, how would 4M operate intra-Argentina routes that don't require the 168 seats of an A320?
The 747: The hands who designed it were guided by god.
 
SCL767
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RE: Future Of AR If The Government Runs Out Of Cash

Tue May 29, 2012 8:56 am

Quoting Byrdluvs747 (Reply 15):

Quoting SCL767 (Reply 14):
LAN would not want AU's jets since bringing in a new type of a/c into the fleet would only increase LAN's operating costs.

In a post-AR environment, how would 4M operate intra-Argentina routes that don't require the 168 seats of an A320?

In a "post-AR environment" where domestic airfares are not dictated by the government, LAN Argentina would operate intra-Argentina routes with A320 family a/c.

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