Argentine govt spars with opposition over airline

BUENOS AIRES, Aug 21 (Reuters) - Embattled ArgentinePresident Cristina Fernandez faces a new challenge this week as lawmakers balk at her plan for a state takeover of the country's debt-laden flagship airline.

Even lawmakers from Fernandez's own Peronist party and its allies, who until recently could be counted on to support her initiatives, have questioned whether the government should absorb the company's debt, estimated at $900 million.

After a political crisis earlier this year over soy taxes and ongoing questioning of official inflation numbers and debt financing strategies, the airline bill is seen as a test of Fernandez's political strength.

Spanish travel group Marsans agreed to sell Aerolineas Argentinas and its sister airline Austral, which together have about 80 percent of the local market, to the government after months of complaints of dismal service.

"We came to set out a set of changes that in our understanding have improved the bill that we are going to take to the floor," Peronist Deputy Walter Agosto, who raised doubts about the original bill, said after a meeting between lawmakers from different factions.

The main change in the bill, which goes to the floor of the lower house for debate on Thursday, is that the government commits to keeping the airline instead of selling it off.

Fernandez, who could count on a strong majority on both houses of Congress when she took office in December, was dealt a surprise defeat in July when senators narrowly rejected her controversial soy exports tax hike.

Debate in Congress has been rare in the administration of Fernandez and her husband and predecessor ex-President Nestor Kirchner, who built a coalition among Peronists and members of other parties.

But Fernandez lost several key congressional allies and her popularity slipped during a four-month standoff with protesting farmers, who eventually forced her to back down on plans to raise taxes on exports of soy, the country's biggest crop.

Marsans and the government agreed that each would come up with an estimate of the company's worth, and if they did not reach a price agreement, would go to international arbitration. Transport Secretary Ricardo Jaime has said the government should not have to pay Marsans anything.

Some opposition lawmakers are pushing another bill that would essentially force Aerolineas Argentinas into bankruptcy so that Marsans is left resolving issues with its creditors, leaving the government to step in to buy its airplanes and routes.

"We want to guarantee the company keeps operating, but we don't want (the state) to assume the debt or the company's monthly losses," said Esteban Bullrich, an opposition congressman.

Supporters of the government bill say that would be dangerous, partly because Aerolineas and Austral have exclusive service to some parts of the country.

"It's not practical in terms of continuity of service," said Deputy Carlos Raimundi, who said he would vote in favor of the president's bill.

In recent years, the Argentine government has taken over the postal system, the largest water company and a train company from private enterprises.

(Reporting by Cesar Illiano; Writing by Fiona Ortiz)