State-owned trend for Latin carriers

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Recent events suggest the pendulum is swinging in parts of Latin America away from private to state ownership in aviation. As Bolivia launched its new state-owned airlineBoliviana de Aviacion, Venezuela declared it will nationalise Aeropostal and centralise control over its airports. Now, Bolivia's President Evo Morales plans to nationalise the country's jet fuel supplier, Air BP.

While Venezuela and Bolivia have led the recent trend, they are not alone. Argentina's nationalisation of Aerolineas and Austral remains subject only to funding, and it has also taken over the big aircraft facility in Cordoba. Earlier this year Uruguay completed a recapitalisation of Pluna that leaves it holding a fourth of the partly-privatised carrier. Other countries continue to support their military carriers, such as Ecuador's TAME and Colombia's Satena, and allow them to expand beyond missionary routes.

This trend is not universal. Peru's government shut down its military-operated TANS amid private carrier complaints, while Mexico privatised Mexicana and Aeromexico.But Latin watchers still note the region's tilt to the left, marked latterly by El Salvador's election of Mauricio Funes.

Private ownership of airlines may be falling out of favour in parts of the region, but they are not giving up without a fight.In Bolivia private carriers tried to block the launch of BoA in late March, but did secure assurances in a decree against government favouritism for its new airline.AeroSur, Amazon, and Aerocon have formed an alliance in response to BoA to integrate their domestic networks under the brand UNA Bolivia. Aerosur's regional vice-president Oscar Vargas says BoA's launch on domestic trunk routes has already cost his airline almost a million dollars in lost revenue. To compensate for this, Vargas says Aerosur will boost its international network, especially in South America's southern cone.

In Venezuela, the government's rationale for nationalising Aeropostal has drawn fire from the country's airline association. President Hugo Chavez justifies the conversion of Aeropostal into "social property" because it recently dropped some domestic routes, leaving domestic cities without air service. Yet, Humberto Figuera, association president, puts the blame on the government for keeping fares below costs and limiting foreign exchange. Starved of hard currency, Figuera argues that local airlines have no choice but to drop marginal routes. He claims Cadivi [the agency that controls foreign exchange]has held up airline conversion of the local bolivar into foreign currency for eight months, even though "70% to 80% of the expenses of the airlines are in dollars or euros".

Figuera also says local airlines suffer at the hand of Venezuala's other state-owned carrierConviasa. "When it was created we thought Conviasa would take care of the social routes, but rather it was dedicated to other routes that are productive," he says. As a result, Conviasa now competeswith private players. With Aeropostal also under state control, Figuera wonders what markets the state carriers will serve.