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Aerolíneas Argentinas

Airline grab gains ground in Argentina  Nov 20, 2008

BUENOS AIRES -- An Argentine congressional committee recommended that the government nationalize flagship airline Aerolíneas Argentinas, in a move likely to heighten investor concerns about the country.

The committee's decision late Tuesday is also likely to increase tensions between the government and Spain's Grupo Marsans SA, which owns 95% of the struggling airline.

In August, Argentina's congress approved a government plan to buy back the carrier from the Spanish company. But the two sides have struggled to agree on an appropriate value. The Argentina government argues that the airline is deeply in debt, while Marsans claims it is worth hundreds of millions of dollars.

Last month, a government court estimated the airline's worth at a negative $800 million. Marsans officials have declined to say exactly how much they think the airline is worth, though local newspapers have cited executives at the Spanish company as valuing it at between $250 million and $400 million.

Mariano West, chairman of the committee recommending the nationalization, said on Tuesday that the government should accept the court's valuation.

The Argentine congress approved the repurchase plan only after removing a clause allowing for the airline's future reprivatization. The congress also granted itself the power to determine the final price of the takeover, a move that may have voided an earlier agreement between Marsans and the government.

Lawmakers had resisted approving the original deal because under it, the state would have to assume $890 million in debt owed by the airline. Marsans also owns 97% of Austral, a smaller regional carrier.

The Argentine government is looking to control both airlines, but the determination of the final buying price has become a key obstacle to their takeover.

Airline grab gains ground in Argentina
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