Aerolineas Argentinas improving, losses still big

BUENOS AIRES (Reuters) - Argentina’s flagship carrier, state-run Aerolineas Argentinas, has seen revenue and passenger traffic jump in recent months but it won’t turn a profit until 2012, the company’s president said on Thursday.

First-quarter revenue jumped 27 percent from a year earlier to $278 million and passenger traffic surged 30 percent in March, Aerolineas’ top executive Mariano Recalde told the Reuters Latin American Investment Summit in Buenos Aires.

But this year, the company still foresees losses of around $400 million, down from $900 million in 2008.

“In 2012, the company will start generating profits to begin reimbursing the government for all its contributions,” Recalde said.

“Earning profits is a secondary goal. Our main aim is to provide a public service, keeping Argentines connected by flying to many cities with punctual, regular service,” he added.

President Cristina Fernandez’s administration nationalized Aerolineas in December 2008, accusing Spanish travel group Marsans of ravaging the company through its neglect.

The carrier plans to renew its entire fleet of planes as part of a $3 billion investment program to 2014.

In July, the first of 20 Embraer EMBR3.SAERJ.N jets purchased with financing from Brazil's state development bank BNDES will be delivered. These planes are earmarked for Austral airline, a subsidiary of Aerolineas Argentinas.

Aerolineas also seeks to incorporate 38 planes for its own domestic and regional flights, which Recalde said could be Boeing BA.N 737-700s and 737-800s, and 15 planes for international routes, which he said could be Airbus' EAD.PA 330 and 340 models.

Aerolineas flies 53 planes on a given day, up from 23 at the time of the state takeover. It dominates in Argentina with 70 percent market share, up from 55 percent in 2008, competing mainly with the local unit of Chile's LAN LAN.SNLFL.N.

But on the international routes it flies, the company has just 15 percent market share.

“We aspire to have 50 percent within the next five years,” Recalde said.

Chronic labor conflicts marked Marsans’ administration of Aerolineas, when canceled and delayed flights were frequent and the company’s image took a nosedive.

Recalde said relations with the six different unions representing workers have improved greatly, and he is confident the two sides will reach an agreement in current wage talks.

The federal government has been pouring around 175 million pesos per month into Aerolineas in recent months to pay salaries, fund investments and help refinance the company’s liabilities, Recalde said.

The airline’s operating revenue registered a loss of about $25 million in the first quarter, similar to the same period of 2009, due in part to higher fuel and labor costs.

“The big improvement in our numbers will come in 2011, when our need for financial help from the state will drop significantly, because most of the Embraer jets will be flying and Aerolineas will also have new planes,” he said.

($1=3.92 Argentine pesos)

Reporting by Hilary Burke and Karina Grazina, editing by Dave Zimmerman