Colombian majors merge

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After 18 months of talks, Colombia's two major carriers, Avianca and ACES-Colombia, have combined with Avianca's domestic subsidiary SAM Colombia to form the country's largest airline. The move is essentially an operational and administrative merger, underwritten by Colombia's National Coffee Federation and investment group Valores Bavaria (ValBavaria).

The new airline will hold 67% of Colombia's air transport market and is expected to generate revenues of around $800 million during its first year.

ACES-Colombia chief executive and president Juan Emilio Posada is to head the new airline. Although the three carriers will retain their original identities, they will operate under a new name yet to be announced.

"The alliance between ACES, Avianca and SAM will significantly strengthen these airlines, allowing them to compete in an increasingly globalised market," says Posada.

With Avianca posting losses of $125.8 million last year and ACES-Colombia expected to register negative 2001 financial results, the combined operator is unlikely to see a financial recovery until 2004.

This year's objective is to slash combined losses to $70 million, followed by a further $20 million reduction during 2003.

Key to the merger was a $332 million injection of funds from ValBavaria and the Colombian Coffee Federation, which are majority shareholders in Avianca and ACES-Colombia.

Although no fleet plans have been revealed, Avianca and ACES are awaiting authorisation to increase frequencies on key domestic and international routes.

The planned alliance was cleared by the Colombian government last December - almost a year after it was initially rejected - with the proviso that the merged airline could not exceed a capped market share.