Pluna Plummets From Record Revenue to Liquidation In One Year

Patrick Archer foreign investment, tourism, uruguay

Exactly one year ago, shareholders in Uruguay’s Pluna were celebrating record revenue, ticket sales and passenger growth. What a difference a year makes.

In the past week, Pluna workers went on strike, the airline suspended operations, and the government decided to sell the airline. It’s a sad turn of events for one of the best regional carriers in terms of modern fleet, low fares and customer service.

So what went wrong?  Interestingly, last week’s union strike was not the culprit. That ill-timed protest was merely a reflection of employee concerns over job security. The real problems began when the airline’s 75% majority investor pulled out of Pluna in mid-June. Then, the Uruguay government took over the airline and wasted little time in opting to sell off the carrier.

Ironically, the root of Pluna’s financial and operational struggles can be traced directly to the two markets where the Montevideo-based carrier flew the most: Argentina and Brazil. Constant strikes and cancellations at Buenos Aires’ Jorge Newbery Airport (Aeroparque) created an operational nightmare for passengers and a drag on the bottom line.

Even more worrisome was a Brazilian court’s recent ruling against Pluna in favor of two ex-employees of former Brazilian carrier, VARIG. Considering there are 7,000 former employees, the US$500,000 judgement in favor of the two plaintiffs could have opened the way to a massive US$3.5 billion judement against the Uruguay government. Hence, el gobierno’s decision to move and move quickly.

Uruguay plans to auction off Pluna’s 7 Bombardier aircraft at an asking price of US$135 million; the leased aircraft will be returned to Bombardier. Airline insiders say Buquebus, a potential acquirer of their former rival, is already adding more AEP-MVD flights to fill the void. (Full Story in Spanish)