Uruguay to shut down bankrupt flagship carrier Pluna -source

Thu Jul 5, 2012 9:01pm EDT

* Uruguay to close bankrupt flagship carrier - govt source

* No new private funding found for company

* Govt eyes new airline with state participation

By Malena Castaldi

MONTEVIDEO, July 5 (Reuters) - Uruguay has decided to close its bankrupt flagship carrier Pluna after failing to find new investors to replace investment fund Leadgate which pulled out, a government source familiar with the situation said on Thursday.

President Jose Mujica's government is instead looking to create a new airline with state participation and ministers will on Monday meet to discuss a legislative bill about the new carrier.

The government took over Pluna's operations in mid-June after Leadgate, which owned a 75 percent stake, refused to invest further in it.

Pluna lost more than $100 million between 2007 and 2012 due to slowing economic growth in the region, high fuel prices and cancellations to Buenos Aires' congested domestic airport.

"(Pluna) was not solvent ... we couldn't finance operations, there's no liquidity and it couldn't continue to fly in this situation," the source, who is part of the government's executive branch, said on condition of anonymity.

The airline released a statement late on Thursday saying it had decided to suspend all its flights indefinitely since "the company's economic-financial situation makes it impossible to ensure adequate operations."

Pluna flew 13 Bombardier planes to connect the Uruguayan capital of Montevideo with cities in Argentina, Brazil and Chile.

Other airlines fly in and out of Montevideo, including the newly formed LATAM Airlines Group, American Airlines and Iberia, which is part of International Airlines Group .

Canada's Chorus Aviation Inc holds a 33 percent stake in Leadgate but said last month the situation at Pluna was not affecting its current cash flow.

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