DAVID KNIBB SEATTLE
Three of the four Latin American carriers that have tried to grow through cross-border affiliates are now engaged in a struggle for dominance along the Andes, the backbone of South America.
In the markets of Chile, Peru, and Ecuador: LanChile is winning; AeroContinente is losing; and Grupo Taca waits for government approval. Brazil's TAM, the fourth Latin carrier that has used affiliates to expand, is sitting this one out.
Ventures by Peru's AeroContinente into Chile and Ecuador have failed. After repeated battles with Chile, starting two years ago with government charges of predatory pricing and, last year, money laundering, AeroContinente Chile finally succumbed in June to safety violation claims. Santiago grounded it a second time, revoked its licence and forced it into bankruptcy. The only thing AeroContinente has left in Chile is a $1 billion lawsuit against the government.
The Peruvian carrier hoped it might gain some support at home over the way Chile treated its subsidiary. It told officials in Lima that the Chilean government had waged a two-year campaign against it, that both the predatory pricing and money laundering charges were reversed after lengthy proceedings, and that the safety charges were also false.
Through diplomatic channels Peru then asked Chile to explain the safety grounding, but it found nothing in Chile's response it could call unjustified. Peru's government refused AeroContinente's request for any tit-for-tat moves against LanChile's local unit LanPeru. "Retaliation," transport minister Luis Chang Reyes says, "is not a valid reason to ground an airline."
This ended AeroContinente's expansion into Chile and failed to roll back LanChile's expansion into Peru. The battle then shifted north to Ecuador. This country has lacked a functioning flag carrier since Ecuatoriana de Aviacion's aircraft were repossessed two years ago. LanChile stepped into the breach with a combination of wet leases and codeshares to restore flights between Ecuador and the USA.
Hoping to oust LanChile, Aero-Continente went to the Ecuadorian government in May with a $7.1 million bid to buy Ecuatoriana and assume its $35 million in debts. LanChile, which had not shown any previous interest in an acquisition, was content simply to use the defunct airline's name and route rights. AeroContinente's bid offer was rejected and the government took the unusual steps of revoking Ecuatoriana's air operating certificate and awarding all its routes to LanChile to operate on its own for the next 12 months.
These moves, including awarding routes to a foreign airline, are justified by the civil aviation director on the grounds that: Ecuatoriana's debts were mounting, it needed to restructure, and Ecuador needed LanChile to serve overseas markets on a stopgap basis until the home carrier could take its own routes back. It estimates that will take a year.
It seems more plausible that Ecuador's authorities felt vulnerable about LanChile's cosy arrangement with Ecuatoriana, an airline defunct in all but name, after AeroContinente had come forward with a bona fide offer to rescue the carrier. AeroContinente, in effect, had called the government's bluff.
Amid this confusion over Ecuatoriana, Grupo Taca resurfaced. Several years ago Taca declared an interest in Ecuador, but instead concentrated on its affiliate Taca Peru. But AeroContinente's bid for Ecuatoriana apparently prompted Taca to dust off plans for an Ecuadorian airline. It has asked Quito for authority to fly to San Salvador and the USA using the name Taca Ecuador. It is unclear, however, if this would be a new airline with Ecuadorian partners or simply Taca Peru flying under a different banner.
The clearest point for now is that LanChile operates under its own name or with an affiliate throughout the Andes from Chile, Peru and Ecuador, while efforts by rivals AeroContinente and Grupo Taca to copy that expansion have failed.
Source: Airline Business
