United's Plan for L.A.-Argentina Flight Hits Turbulence.

United Airlines' plan to introduce the first nonstop L.A. flights to Argentina and Brazil later this year was unexpectedly thrown into doubt last week when the Argentine government announced it would indefinitely suspend its agreement with the United States to end flight restrictions.

That Agreement, signed last year by Argentina' s previous government, calls for the gradual phasing out of flight restrictions, which have been maintained to keep aloft the nation's beleaguered airline, Aerolineas Argentinas.

The stakes are sizable, and growing. Each daily nonstop flight between Los Angeles International Airport and either Buenos Aires, Argentina or Sao Paolo, Brazil would bring $171 million in annual economic benefits to the Southern California economy, according to United estimates. So together, the two routes would generate nearly $350 million a year.

Despite the turbulence, officials at United and the U.S. Department of Transportation remained confident late last week that the new routes will be awarded on schedule this summer.

"We have had no communication from the (Argentine) government to change our agreement. It still stands as far as we're concerned," said Dick Mosely, a spokesman for the U.S. Department of Transportation. "We're moving ahead with our proceedings."

Mosely downplayed the suspension, saying such temporary changes of heart are not uncommon in bilateral agreements. "These agreements change all the time, especially when you're dealing with a host of factors such as country economies, business structures and government," he said.

Similarly, United officials were upbeat last week.

"At this point, we remain hopeful that plans will proceed accordingly," said Mike Liberman, vice president of United's Western region. "United is very excited about this. It would complement our domestic and Pacific operations where we fly to the South Pacific, Sydney and Europe."

United is only one of three airlines competing for the lucrative new routes. Continental Airlines is bidding to originate the new South American routes out of Newark, N.J., and Delta Airlines is bidding to originate them out of Atlanta.

But many consider United to be a shoo-in, because plenty of nonstop flights to Latin America already originate from East Coast airports, and West Coast demand for such flights has been soaring.

If the deal goes through, United would have the only nonstop flight to Argentina and Brazil, shaving five to six hours off the current United flights to those destinations, which require connecting flights in New York and Chicago.

United spent about $260 million last year to create a Los Angeles hub and more than double its daily departures to 200. It's now the biggest carrier at LAX, serving 27,000 passengers a day.

"United has been beefing up its services in Los Angeles for the past couple of years, and this move could help solidify its international offerings in Los Angeles," said Glenn Engel, an analyst at Goldman Sachs & Co.

For Los Angeles, the added flight would be a boon to the economy because L.A. currently captures just 8 percent of U.S.-South American passenger traffic, a far cry from Miami with 48 percent, New York with 25 percent and Orlando, Fla. with 23 percent.

More than 45,000 Argentines and 70,000 Brazilians flew to Los Angeles in 1999, according to estimates by CIC Research, generating a total of $136 million. Those numbers would likely jump if United were to win the new nonstop routes.

In addition, the proposed service would stimulate exports to Brazil and Argentina, already California's two largest South American export markets.

"It's an up-and-coming market for tourism and business, and given L.A. access, it's one that we can grow substantially," said Patti MacKennett, senior vice president of international marketing at the Los Angeles Convention & Visitors Bureau.

About 39.2 million passengers traveled between the United States and Latin America last year, and the Federal Aviation Administration estimates that traffic will grow another 5.5 percent this year. By 2010, the FAA estimates, some 77.8 million passengers will fly the corridor, outpacing every other international market.

The upside is indeed huge, analysts say, because the market is still in the early stages of development.

"When you compare Latin America to world traffic, it. only represents 3 percent of the world traffic," said Jay Donoghue, editor-in-chief of Air Transport World magazine. "There hasn't been a lot of activity in the area, in the past, but U.S. airlines now have been forging deals with Latin carriers and are building critical mass in the region, making it a viable market."