Austral was fully integrated into Aerolíneas Argentinas; however, some differences arose, especially those relying upon the unions the staff of both companies are affiliated to, which led to constant conflicts.

The origins of the carrier trace back to 1957,[12] when Compañía Austral de Transportes Aéreos SACI (CATASACI) was founded, starting scheduled services in January 1958 (1958-01).

[13] CATASACI focused its services on southwestern Argentina, but it also operated international flights to Montevideo, Puerto Montt and Punta Arenas.

[13] At May 1971 (1971-05), the ALA fleet consisted of two C-46s, five DC-3s, two DC-6Bs and five YS-11A-300s that served a domestic network including Buenos Aires, Corrientes, Formosa, Goya, Paraná, Paso de los Libres, Posadas, Resistencia, Rosario, Salta, Santa Fe and Tucumán, plus regional services to Antofagasta and Asunción,[17] whereas CATASACI had a fleet that included seven BAC One-Elevens —four 400s and three 500s—, one C-46, one DC-6 and three YS-11s.

Aerolíneas Argentinas' pilots union understood the government effort was not to solve their affiliates salary conflict, but to focus on privatising a loss-making carrier as Austral was instead.

Shortly afterwards, the company faced a major accident during its new private era on 12 June 1988, when a McDonnell Douglas MD-81 hit a tree on a low visibility approach into Posadas and crashed.

Apart from the 22 fatalities involved in the accident, it also spread concerns on the aviation sector over the airline's poor rate of occupation on some routes, of just 10.32% for this particular flight.

[citation needed] Cielos del Sur S.A. and Iberia formed a consortium to acquire an 85% stake in Aerolíneas Argentinas in 1990, within the framework of that flag carrier privatisation.

[23] On 21 July 2008 the Argentine Government took the airline back into state control after acquiring 99.4% of the share capital for an undisclosed price.