How the State Financed an Airline to Avoid Bankruptcy Proceedings
<p><span style="line-height: 20.8px;">The state company LAFSA was born in 2003 to ensure continuity of workers affected by the closure of the LAPA and DINAR companies. The bailout signed an agreement with Southern Winds that according to the AGN was "negative" for the Nation, which spent more than $100 million and a loss-funded company that requested a reorganization following the termination of the agreement. With this data, Judge Sergio Torres initiated a case against Transportation Secretary Ricardo Jaime. Within days of the legislative debate for the nationalization of Aerolineas Argentinas (Argentine Airlines), a sample of which by this time is called the "dumb State".</span></p>
To ensure continuity of service and employees of the two airlines who seized their activity, LAPA and DINAR, the Federal Government created by decree of necessity and urgency LAFSA Company in May 2003. The new venture was a transitional object, a bailout until a single operative is achieved with own planes to make it attractive in future privatization processes.
In September of that same year, LAFSA authorities approved a proposal from Southern Winds (SW) to join the rescue project LAPA and DINAR "at the express request of the Office of the President and the intervention of the Ministry of Transport, Legal and Technical," says the minutes of the Board. In the Collaboration agreement signed by LAFSA and SW, the state firm took over fuel costs and the legacy of shattered airline staff while SW -planes- contributed its operational structure, and its commercial experience.
A report from the General Audit Office (AGN, for its acronym in Spanish) concluded that ACE was "negative" for the state, that during the 18-month term of the agreement, it invested $ 101,601,837.74, without getting LAFSA to "start airline operations as a single operative "for having given the services to SW. In addition, the watchdog found no studies that justify "convenience" of ACE considering that "the financial position of SW was very difficult, with negative assets in 2003 and 2004." According to the AGN the agreement only "was useful for Southern Winds" which maintained it’s corporate and commercial existence without the participation of LAFSA in these areas, and received a "financing" which served only to prolong its operational continuity. In fact, a week after the Executive terminates ACE, amid a scandal over drug trafficking to Spain aboard a SW plane, the owner asked the Judiciary for the reorganization.
Before the watchdog report is approved, Federal Judge Sergio Torres ordered the details of the Audit to initiate legal proceedings against the Secretary of Transportation, Ricardo Jaime, which is still pending.
In its analysis of the agreement between LAFSA and SW, the AGN found other irregularities. First, the legal instrument used for the association, the "Agreement on Cooperation entrepreneur" cannot fit within the rates established by Law No. 19,550 on Corporations. The watchdog says another figure "would have allowed to accurately define the rights and obligations to third parties, against possible claims." In this sense, the operational plan of ACE "had no definitions of the specific responsibilities of the parties," the report said.
On the other hand, the audit found no evidence to justify the change of the parameter in terms of contribution LAFSA fuel. $ 3.2 million a month passed 3,928,877 liters. "But the worst -continues the study-is the lack of controls on LAFSA in loading mechanism fuels." The State left in the hands of SW the responsibility for loading and confined itself to a later audit "by supporting documentation" as airline tickets, some were date, place, plane, and number of liters were recorded. The AGN analyzed the circuits detected, the payments, and the lack of airline tickets that were billed and paid, some did not include the adoption of a responsible SW and others that appeared tuition aircraft did not include in the ACE. During the term of the agreement, the state funded fuel for $ 71,385,745; of that total, LAFSA contributed $ 63.7 million and the Ministry of Transportation, $ 8 million.
According to ACE, the prerequisite for working in LAFSA was that employees should come from LAPA and DINAR. "The irregularities in this area are several" says the AGN: there are differences between the personnel listed in an annex of the agreement and those who actually entered LAFSA and, despite not having checked the effective delivery of services workers, retroactive payments corresponding to October, November, and December 2003 were also Southern Winds allocated $ 14,999,778 in 2004 to pay the salaries of its 851 employees, while LAFSA, with its 855 workers, spent $ 26,145,812 in the same period.
Another shortcoming which highlighted the audit is "lack of intervention of the Coordinating Body ACE". These units was formed by the signatories, the presidents of LAFSA, and SW, and a member who was appointed by the Ministry of Planning, and adopt common decisions, especially regarding control functions. But never Planning and appointed its representative office ended it by exercising "ad-hoc" Transportation Secretary. This Secretariat "took important decisions in the ACE when, in turn, had to fulfill functions of control and regulation," said the AGN, adding that, beyond the incompatibility of his function of Transportation, the Authority showed a lack operation because they only met once during the 18 months term of the agreement.
Finally, the study says that while the Cooperation Agreement Entrepreneur existed, LAFSA "had no income to allow it to recover part of their investment or increase their assets," and that, recalling their initial goal, the privatization process was never initiated, it has no aircraft of its own and was not yet settled and continues to incur expenses for the State.