Only the threatening possibility of continuing to lose money forced the airlines to smoke the peace pipe with the cargo agents of Argentina, with whom they had to sit between the 10^th and the 25^th of January to renegotiate a debt of approximately 5 million dollars agents kept with airlines through freight ordered by them and executed by the airlines during December 2001.

The debt payment had entered a shadow cone as soon as President Eduardo Duhalde announced the end of monetary convertibility that stipulated the value of the Argentine peso equal to the American dollar. But the panorama darkened even more when the sanction of law 25.561 established that every debt contracted in dollars (as was the case of the air freights) would have to be converted automatically into pesos but respecting 1 to 1 parity between the Argentine currency and the American.

A real fight between the agents and the airlines started from there.

While the first intended paying the 5 million in local currency, the latter demanded payment in dollars. Or at least its equivalent in pesos, but multiplying those five million by 1.40 being this the value the government fixed as “official” for buying dollars with pesos.

Airlines backed their claim in that the invoicing was expressed in dollars; it was logical to apply the “official” exchange rate to allow them to obtain the whole of the green bills that had been agreed on during the sales.

They also proposed not altering any of the Trading conditions agreed on through the Cargo Accounting Settlement System (CASS), by which the invoicing periods would be kept (fifteen days) and the cancellation time (thirty days) as well as the cancellation of invoices in Argentine currency.

This was the model finally agreed on by both groups, so as to continue working as from now, with the reservation that 15 days for cancellation of payment were agreed on as from the second half of January to reduce risks of a future monetary devaluation.

What took most time was the conciliation of the 5 million-dollar debt.

Step by step

The already known institutional crisis Argentina lived during December resulted in the country having five different presidents in less than twenty days, the last one of which, Eduardo Duhalde, disposed the referred devaluation while a week-long bank holiday was in effect, which prevented exchanging pesos for dollars.

In spite of this last financial hindrance, to which the prohibition of wiring money abroad must be added, agents carried on selling freight during December and airlines went on transporting it.

Parallel to that, air companies collected that same month, their credits corresponding to the second half of November, money that when they wanted to convert to dollars it was too late because the devaluation had been decreed before the exchange activities were restarted

“The agents collected November freights with a 1/1 parity and paid us the same way. But when we wanted to use the money, the dollar had already shot up and we ended up losing money”, an airline executive commented to AIR MARKET. We lost with the second half of November. We do not want to lose as well with December”, another sustained.

But they lost. Agents kept their ground and they gave in by accepting to share the effects of the devaluation, but only with the freights completed during the second half of December. For the invoicing of these freights, the tariff agreement was subject to that for every dollar sold, agents agreed to pay 1.20 pesos.

The 20 cents difference had to be on the airlines.

It was this way because during the meetings held by both groups of representatives, speakers for the agents assured that many Argentine exporters, aware of the convertibility’s imminent disappearance, had anticipated their payments for the December freights to benefit from the 1/1 parity between the local currency and the North American one.

We have already collected, so we cannot transfer that 40 cent rise to anyone.” they sustained at the meetings with their peers of the airlines, who, incidentally, never believed the excuse given by the agents.

“That the exporters have paid all their shipments in spite of all the inconvenience due to the bank holidays sounds strange”, a director of one of the airlines expressed. who also added “during a long time the agents asked us to extend the freight payment dues to 30 days because the exporters took too long to pay, and now they say they all paid in advance?”

The truth is that without proof at hand the airlines had to believe what the agents said and shorten the times so as to close a deal as soon as possible because the moment for invoicing both fortnights of January was near, for which first, an agreement had to be reached concerning payments related to December. On January 21^st, the airlines got together to propose a solution to the litigation and, once the necessary points were agreed on they conveyed the proposal to the agents. The idea consisted on sharing the December loss and collect both halves at a rate of 1.20 dollars for each dollar invoiced.

Really, the offered solution was to accept the payment the agents had already made for the first half (Which they had paid 1 to 1) and pact for the liquidation of the last fifteen days at 1.40 per dollar, thus averaging 1.20 pesos per dollar for the month. And even then the airlines were the most damaged because the first half invoicing (cancelled 1/1) was superior to the second (1.40/1) in a little over 300.000 dollars

But the agents refused the offer and maintained their posture of paying 1.20 per dollar and only for the liquidation of the second half of December.            Days went by, and the hours that were left to continue with the negotiations to reach an agreement were less and less. Furthermore in case no agreement was met the attitude to be taken was left for each company to decide., which would have given grounds to the agents to make the payments through the Court.

The court deposits would have generated greater damage for the airlines now that those funds would not only be deposited at a 1/1 parity, but would be immobilised and with a very slight chance for the air companies to recover the rate difference.

That was how only facing the threatening possibility of loosing money the airlines were forced to smoke the peace pipe with the cargo agents and close the deals for a debt that reached, exactly, 4.678.540.19 dollars (finally converted to 5.113.372.71 pesos).