Uruguay's Pluna Suspends Flights as Financial Problems Mount
07/06/2012| 03:39pm US/Eastern
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--Pluna suspends all flights due to financial difficulties
--Uruguay's government, a shareholder, may push for liquidation of the airline
--Company's fleet of 13 Bombardier jets may be sold; Bombardier says no impact on plane maker
(Updates with statement from Pluna in sixth paragraph and Bombardier comment in ninth.)
SAO PAULO--Uruguay's national airline, Pluna SA, said late Thursday it has suspended all flights indefinitely as it tries to resolve financial difficulties.
Uruguay's government, which last month took control of the carrier, had been seeking a strategic investor for the struggling company. Canadian investment group Chorus Aviation Inc. (CHRVF, CHR.A.T, CHR.B.T) said June 21 that its minority stake in Pluna had been transferred to a trust while it works with the government on a potential recapitalization of the airline.
Uruguayan newspapers, however, said Friday the government was seeking to liquidate the airline and has already found interested buyers for the 13 Bombardier (BDRBF, BBD.A.T, BBD.B.T) planes flown by the company.
To that end, the country's transportation and finance ministers met with the opposition to get the necessary congressional approval to liquidate the airline, El Observador newspaper reported Friday.
According to Reuters, ministers are set to meet Monday to possibly form a new airline with government participation, a move favored by Uruguayan President Jose Mujica.
Pluna's press office, when contacted by Dow Jones Newswires, declined to comment beyond its original statement, which said the airline was halting flights due to "the company's economic-financial situation that makes it impossible to ensure adequate operations."
"The problem is that today we have a situation in which we don't have the ability to assist, since this is a private company of which we are a minority shareholder," El Observador quoted Transportation Minister Enrique Pintado as saying. "We don't have the framework to assist them financially, and the company doesn't have the necessary resources to keep flying."
Uruguayan ministries didn't return calls seeking comment.
A Bombardier spokesman told Dow Jones Newswires it doesn't have any outstanding orders from Pluna, and any possible economic impact on the Canadian plane maker would be "very limited."
Chorus paid $15 million in 2010 for a one-third stake in the holding company that owns 75% of Pluna's shares, with the government owning the other 25%.
Chorus didn't immediately return calls from Dow Jones Newswires seeking comment.
Pluna said Tuesday it was suspending flights temporarily as employees went on strike to protest potential job cuts should a new investor take over.
Pluna flies to Argentina, Brazil, Chile and Paraguay. It also operates flights to Spain and Miami through partnerships with Iberia and American Airlines. Montevideo is also serviced by other carriers, including Latam (>> LATAM Airlines Group SA), formed by the merger of Brazil's TAM and Chile's Lan, and Aerolineas Argentinas.
Write to Paulo Winterstein at paulo.winterstein@dowjones.com
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