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Aviation History
1999
1999 - 2003.PDF
MIR TRANSPORT Fit to . survive LanChile is determined to flourish in an unpredictable economic climate that has already claimed two airlines MlT "We are fighting for an open skies agreement with the USA, Argentina and Peru." - Cueto DAVID LEARMOUNT/SANTIAGO DE CHILE LATIN AMERICAN airlines are punch drunk. They have been successively hit by precarious home economies, a diving Brazilian currency, the Asia-Pacific eco nomic crisis and a wave of powerful US carriers surging into their liberalising marketplace. Despite this, LanChile's chief executive En rique Cueto has the confidence of one who sees all the long-term indicators pointing upward. The airline's profits halved to $31 million in last year's economic downturn. Cueto predicts similar profits for 1999, which he accepts will be "a very bad year". The US Federal Aviation Administration, however, projects the average annual growth rate in Latin America at 6.5% to 2 010 - about two percentage points above fore cast growth for North America and Europe. Nevertheless, sustaining confidence is diffi cult in the current Latin American economy. Three years ago, Venezuela lost its flag carri er VIASA. In Peru, Chile's northern neigh bour, AeroPeru has been grounded by debt since March and its independent competitor Faucett Airlines folded in 1997. Meanwhile, Brazil's Varig, South America's largest airline, has struggled to survive since the nation's eco nomic crisis and currency collapse last year. There may be a shortage of capital in Latin American air transport, but no shortage of enterprise. LanChile, via its 49%-owned LanPeru, is bidding for the space left by the defunct national carriers. LanPeru, starting with three of LanChile's Boeing 737-200s in a livery derived from its Chilean partner, launched Peru domestic ser vices in early July, serving six destinations. The majority LanPeru shareholder (51%) is local enterprise Peruval and the airline's president is businessman Lorenzo Souza, with whom Cueto had been negotiating for about a year to get the new enterprise airborne. Chile has good traffic rights with Peru, Cueto points out, emphasising that his airline runs daily non-stop Lima-Los Angeles and Lima- New York schedules. Meanwhile, the dormant AeroPeru has received offers from dominant local carrier Aero Continente and USA-based Air Power to help it get airborne again. LanChile and US major Continental Airlines have withdrawn bids for holdings in AeroPeru and Aero Continente and LanChile are bidding to take up AeroPeru's dormant right to operate the Lima-Miami route. A series of accidents in the past five years gave Peruvian airlines a poor safety reputation, Cueto says, hitting Peru's tourist trade hard, according to Cueto. The country badly needs more direct services linking it with the USA, he says, and LanChile aims for a share in this, per haps realising part of the predicted consolida tion of air services in Latin America. OOdttS Latin American airlines "will consolidate quickly", says Federico Bloch, group chief exec utive of Grupo TACA, Central America's most powerful recent airline union outside Mexico. He is working to prove the truth of his own fore cast: Grupo TACA comprises carriers from Guatemala, Honduras, Nicaragua, Panama and Costa Rica, allied to American Airlines, and the group is at work on starting TransAm in Peru. Bloch has a clear image of the South American air transport industry's vulnerablity: "I think in 10 years' time there will be only a handful of car riers in Latin America." Gustavo Lenis, chief executive of Colombia's main carrier Avianca, is more precise about the underlying problem: "All airlines in Latin America need more capital." Cueto maintains that it is impossible to com pete on equal terms with the US carriers, so alliances with them are essential. Just before LanChile joined the American Airlines/British Airways-led oneworld alliance, Bloch said that a carrier can bring only one of two offerings to an alliance: money or market dominance. According to Bloch's thesis, the US carrier is expected to bring the money, so a Latin American partner must bring market domi nance in its arena. Even before LanChile had teamed with American via oneworld, Cueto had established codeshare arrangements and a com mon frequent-flier programme (FFP) with the US carrier. Tying its LanPass FFP into 26 FLIGHT INTERNATIONAL 7 - 13 July 1999
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