ANOTHER AEROLINEAS ARGENTINAS STRIKE REMAINS A

C O N F I D E N T I A L BUENOS AIRES 000470

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EB/TRA FOR JEFF HORWITZ
EB/TRA/OTP FOR BIRD MATTINGLEY
CA/OCS/ACS/WHA FOR SHRILEY CRAWFORD
FAA WASHDC FOR LEEANN HART

E.O. 12958: DECL: 02/24/2016
TAGS: EAIR ECON AR
SUBJECT: ANOTHER AEROLINEAS ARGENTINAS STRIKE REMAINS A
DISTINCT POSSIBILITY

REF: (05) BUENOS AIRES 3008

Classified By: Ambassador Lino Gutierrez for reasons 1.4(b) and (d).

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Summary
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1. (C) The threat that the November 2005 strike will repeat
itself on or after March 1 remains a distinct possibility.
The pilots' and mechanics' unions entered salary negotiations
with the national flag carrier on December 2, 2005, at the
conclusion of a 9-day strike. Under the GOA-brokered
settlement that ended the strike, Aerolineas and the unions
agreed to a 90-day period of salary negotiations. Aerolineas
agreed to provide partial pay increases, and the unions
agreed to refrain from work stoppages during the period. The
90-day negotiating period ends on February 28 according to
Aerolineas, but ends on March 1 according to press accounts.
Secretary of Transportation Ricardo Jaime has submitted a

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plan to allow a phased-in 20-percent tariff increase which
would begin to take effect as early as April 17. As of
February 27, however, the GOA has not approved Jaime's
proposal. Aerolineas has not indicated whether it can fund
the salary increases between now and the expected date when
Secretary Jaime's increased tariffs would take effect. The

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pilots' union representatives have indicated that Jaime's
proposal will not meet the pilots' salary demands. End
Summary.

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The November 2005 Strike
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2. (C) Pilots and mechanics working for Aerolineas
Argentinas initiated a strike over salary increases on
November 24, 2005. The strike lasted nine days and delayed
air travel for, or stranded, more than 80,000 passengers.
The Ministry of Labor called for the two sides to negotiate
their differences at the outset of the strike. On November
29, Labor warned the pilots' and mechanics' unions, APLA and
APTA respectively, that they would be fined 10.5 million
pesos for failing to participate in the mandatory
conciliation meetings for which the ministry would be the
arbiter. APLA and APTA continued to strike nevertheless.
(Note: Under Secretary for Labor Relations Guillermo Navone
clarified that the unions' actions are subject to review by
an investigations board before a fine is imposed. To date,
Labor has not imposed fines related to the November 2005
strike on either APLA or APTA. End Note.)


3. (C) Cabinet Chief Alberto Fernandez called a meeting in
the Casa Rosada on December 1, 2005, with representatives of
APLA and APTA to meet with Gerardo Diaz, a principal
shareholder of the Spanish firm Marsans, which manages
Aerolineas. (Comment: Whether Aerolineas' president Antonio
Mata withdrew himself from the negotiations or was pressured
to abandon the settlement discussions remains unclear.
Aviation sector consultant Pat Seidel suggested that the Casa
Rosada called for Diaz to replace Mata in the settlement
process because President Kirchner dislikes Mata. Seidel
observed that Mata refused to offer Aerolineas' services to
Kirchner's dark-horse presidential campaign in 2003, but Mata
did offer to assist the Menem campaign. Seidel speculated
that Diaz was involved in the settlement instead of Mata
because Kirchner had not forgotten Mata's "unfortunate
slight." End Comment.) The terms of the offer that
Fernandez presented were: that the two sides would have 90
days to negotiate salary issues; that APLA and APTA would
refrain from work stoppages during the negotiating period;
and that the GOA would consider allowing a tariff increase.
Diaz also offered the pilots and mechanics short-term pay
increases, which would be retroactive to the beginning of the
strike. APLA and APTA presented the terms of the proposed
settlement to their respective members, who accepted the
offer on December 2.

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Nearing the End of the "90-Day Fuse"



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4. (C) Aerolineas Argentinas Director for Corporate Planning
and Business Development Daniel Burlas told Econoff on
February 27 that the demands for increased salaries, 45
percent for the pilots and 75 percent for the mechanics, are
reasonable in principle. He said, however, that the company
has lacked the resources to provide salary increases since
early 2002 when the GOA placed restrictions on the airline's
ability to increase tariffs. Burlas expressed his doubts
that APLA and APTA had entered the negotiating period last
December in good faith. He said the "unions' commitment to
refrain from striking was just a bomb with a 90-day fuse."
He has also criticized the unions' approach as "not so much
negotiating as trying to gut the company." Burlas told
Econoff he was not personally optimistic that a strike could
be avoided, since APLA and APTA had refused the airline's
most recent offer on February 7. He nevertheless mentioned
that "a representative of Marsans will come to Buenos Aires
on March 2 to continue the negotiations."


5. (C) The Ministry of Labor has announced that it will
convene a meeting between the airline and the unions
representatives on March 1. Burlas noted that Marsans is
interested in discussing the details of the GOA's proposal on
tariff increases which Secretary of Transportation Ricardo
Jaime has drafted. News reports state that the plan calls
for a phased-in approach which would ultimately produce a
20-percent increase in domestic tariffs. Jaime's proposal
reportedly takes the GOA's inflation concerns into
consideration by suggesting that the initial increases would
become effective as early as April 17. (Comment: The GOA
would reap a dual benefit from this approach. First, it
would postpone any inflationary effects associated with
higher airline tarrifs. Second, it avoids generating
discontent before the typically heavy-travel season of Holy
Week, which is the week of April 10 this year. End Comment.)
APLA representatives, however, have stated that Jaime's
plan, if approved, "would not be sufficient to meet the
increased salary demand." APLA and APTA representatives have
reportedly discarded the prospects that a final session with
Labor will meet their members' demands, and they have not
ruled out initiating another strike.

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Comment
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6. (C) The threat that the November 2005 strike will repeat
itself on or after March 1 remains a distinct possibility
even though Marsans has announced that one of its
representatives will be in Buenos Aires on March 2 for more
salary negotiations. APLA representatives have announced
that Secretary Jaime's proposal on increased tariffs will not
satisfy the pilots' demands for higher salaries. Inflation
concerns may preclude the GOA's approval of Jaime's tariff
proposal. The GOA may decide to employ alternate measures
such as reduced airport fees or reductions in value-added tax
remittances that airlines collect during ticket sales.


7. (U) To see more Buenos Aires reporting, visit our
classified website at:
http://www.state.sgov.gov/p/wha/buenosaires.< /a>
GUTIERREZ