Uruguay's Pluna returns to profitability

By Brendan Sobie

Uruguay's Pluna has returned to profitability and completed the restructuring process begun when German investor group Leadgate acquired the small ailing flag carrier in 2007.

Chief executive Matias Campiani says Pluna incurred a $27 million loss in the fiscal year ending 30 June 2008 and will again be in the red in the current fiscal year due to heavy losses incurred before it dropped its only long-haul route in September. But he says the carrier turned the corner in October and is expected to be profitable in calendar 2009: "We've been working hard to turn around the company. In October we broke even and in November we started making money."


Leadgate is led by three partners of Argentinean descent who take a hands-on approach to transforming companies they invest in. At Pluna, the trio - Campiana, chief financial officer Sebastian Hirsch and chief transformation officer Arturo Demalde - renewed the fleet, overhauled the network and adopted a new low-cost regional carrier business model.

Pluna's new fleet of seven Bombardier CRJ900s, delivered last year, has allowed it to cut costs, improve efficiencies, add frequencies and launch new thin routes to secondary cities. The new business model focuses on short-haul transfer traffic, turning Montevideo into a hub for South America's Southern Cone, and feeding larger intercontinental carriers. It essentially turns Pluna into a regional carrier while adopting low-cost principles.

Campiani says Pluna has been fortunate to learn from low-cost carriers in the portfolio of US investment firm Indigo Partners, including Indonesia's Mandala, Singapore's Tiger Airways and Hungary's Wizz Air. While Indigo has no stake in Pluna its founder Bill Franke individually has a share. Leadgate controls 75% of Pluna, with stakes owned by its three partners and individuals including Franke. The government retains the remaining 25%.

Leadgate has had a rocky relationship with the Uruguayan government and the carrier's two unions, with a particularly nasty dispute arising after Leadgate decided in August to axe Pluna's Madrid service and return its only widebody, a Boeing 767. The relationship with the ­government was patched up just before Christmas, with Leadgate agreeing to pump another $9 million into Pluna over the next 18 months and pay an overdue bill from a government-owned petrol supplier. The government, in turn, agreed to pump in another $3 million and buy back for $12 million a hotel it had given Leadgate as part of the original deal. Leadgate's initial investment in Pluna was $15 million.

Campiani says further capital infusions will not be required because Pluna, which has an annual revenue stream of just under $100 million, is now profitable. Leadgate typically sells the companies it acquires after transforming them but Campiani says it will not look to exit Pluna until 2010 at the earliest. "We're some way away. We want to make sure the company has a viable and sustainable business," he says.

Copyright © 2009 Aviation News Release

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