Uruguay’s flag carrier Pluna “indefinitely grounded” and most staff redundant

Uruguay’s flagship carrier Pluna said on Thursday that is was “suspending all flights indefinitely” and announced that 720 of the 900 staff would be sent on unemployment pay until a new associate for the company is found or the airline is definitively sold.

 The colourful Canadian Bombardiers lined up in Carrasco airport

“The economic and financial situation of the company makes it impossible to ensure proper operations” said a press statement from Pluna adding that the company will provide all the resources available to contact the passengers affected by these circumstances in order “to seek the best possible solution”.

The company since mid June was under management of the Uruguayan government after the private associate LeadGate with a majority stake, 75%, stepped down overwhelmed by debts and a negative operational equation.

“Of the 900 people working for Pluna, in Uruguay and overseas, 720 will collect unemployment insurance” said Public Works and Transport minister Enrique Pintado, from whose office the bankrupt airline depends.

Earlier in the day Pintado met with the management of Pluna, Vice President Danilo Astori and Economy minister Fernando Lorenzo, and later with the leaders from the parliament opposition to inform them of the situation which apparently involves debts of over 500 million dollars and the massive redundancy.

“The problem of Pluna is financial and of liquidity and that is why it can’t fly any longer in current conditions. On Monday the cabinet will address several options that are under consideration including an urgent bill on the issue” said Pintado.

Economy minister Lorenzo said that the Uruguayan government with a 25% stake in the company is a minority partner and if there are no chances to re-capitalize or to find fresh funds, the airline will seek protection from creditors and decide on future steps.

Thursday media reports from the weekly Busqueda, which has as its main informant President Jose Mujica said that “the president is not willing to keep loosing money with Pluna” and is assessing whether to definitively close or sell 100% of the flag carrier assets.

According to the weekly, if no understanding is reached with the Canadian group Chorus-Jazz, which has a 25% interest in the airline through majority private stake holder LeadGate, or with the Argentine transport businessman Juan Carlos Lopez Mena who has expressed an interest, “the Uruguayan government will try and recover part of the money invested in the company by selling its assets such as the aircraft”.

However Fernando Passadore who became president of the company after the LeadGate group left said that “the image and credibility of the company can’t be recovered overnight, so we are facing a crucial period”.

He added that “once passengers’ trust is lost because of uncertainties it is very difficult to recover them”.

The LeadGate financial group headed by Matías Campiani took over Pluna as majority share holders five years ago with a specific plan to incorporate new aircraft (13 Canadian Bombardier), expand flights and routes such as Spain and the US, re-capitalizing the airline and developing the cargo business.

However besides the Bombardiers purchases, some of them with Uruguayan government collateral and others through the exports’ promotion fund from the Canadian government, the rest of the promises vanished into thin air.

LeadGate is basically a financial group closely linked to Argentina which had no experience in the air industry and which was repeatedly accused in the Uruguayan parliament by the opposition of not honouring contract conditions with the minority partner, and the Uruguayan government making the main financial effort to keep her flying.

The situation of Pluna despite the first very prudent statements from the opposition following the emergency meeting with government officials, is bound to become a major scandal which could involve the loss of hundreds of million of dollars for Uruguay. And this despite repeated warnings about the mismanagement and non compliance of the original contract by the private associates.

The Uruguayan government picked Thursday/Friday to make the radical announcement taking advantage of a 48-hour strike from Pluna’s personnel demanding to know the financial situation of the company and their jobs’ future.

The scandal could easily reach Canada and the Canadian officials involved in financing the sale of Bombardier aircraft through the Export Development Canada fund to a non profitable airline and a group of alleged businesspeople with virtually no experience in the airline business.

Furthermore the Chorus-Jazz group which joined Pluna in 2010 with 15 million dollars as a shareholder of LeadGate has its own financial problems following the cancelling of a major contract with the travel agency Thomas Cook, valued in 100 million dollars.