Argentina Airline Takeover Drains Cash

Argentina’s nationalization of a struggling, Spanish-owned airline brings costly responsibilities that could drain public resources and force fare hikes unless oil prices fall, analysts said Friday.

Argentina’s Senate this week voted to “proceed in the rescue” of Aerolineas Argentinas and its subsidiary Austral –returning the carrier to state hands in a bid to stabilize the country’s troubled airline industry. Argentina’s lower house approved the bill in August.

Officials haven’t yet revealed what Argentina will pay Madrid-based Grupo Marsans for its estimated 94 percent stake in the airline, but the government will likely be hardest hit when it assumes what it claims to be the airline’s $900 million in debts.

A Buenos Aires-based spokesman hired to represent Marsans declined to comment on the takeover, but the privately held company has denied having those debts in the past.

Analysts meanwhile doubt that the government can make Aerolineas profitable, and with oil prices topping $100 per barrel, the takeover means the government will now not only subsidize, but foot the bill, for its increased operating costs.