After its takeover by the Venezuelan Government, Avensa has signed a letter of intent to operate jointly with rival Aserca within the next six months. Stopping short of a full merger, this effectively will reduce Venezuela to two major airlines - Aserca and Aeropostal.

Wilmar Castro, appointed by the government as Avensa chairman to replace Henry Lord Boulton, says his only other choice was to ground the troubled airline. Avensa was already short of cash when December's floods and landslides closed the Caracas Airport and forced Boulton to appeal for help. The government owns a fifth of Avensa's shares and holds a veto right.

Under the arrangement, Avensa must pay its $53 million in debts and convert the company into a "classic" corporation. That means ending its use of 36 "microcompanies" and the outsourcing that Avensa used with its low cost unit, Servivensa, to avoid labour unions.

Castro thinks he can meet these goals in the next six months, provided that his beard holds up. The Elian affair has clearly raised the Cuban president's flagging profile. "You guys want debts collected. You got it," said one mobster close to the talks.

Source: Airline Business