Peruvian aviation was never for the fainthearted, but its current turmoil is volatile even by Lima's standards. The chief executive of bankrupt local carrier Faucett Peru is the apparent victim of a behind-the-scenes power struggle even with his airline in receivership. A new law allowing foreign carriers to operate domestic routes jeopardises the future of local start-ups, while AeroContinente has hit flak in the USA over its request to serve Miami.

Faucett's restructuring took an unexpected twist in early October when its creditors sacked chief executive Roberto Leigh. A representative from the Peruvian tax agency, SUNAT, took over as receivership trustee, while creditors appointed German Larrieu Bellido as Faucett's administrator. He has no known aviation background.

Details on Leigh's departure are sketchy, but insiders suspect Leigh and Alfredo Zanetti, Faucett's former owner, have been wrestling for months over control of the airline and Zanetti won. Leigh vows to fight his dismissal.

How this will affect Faucett's comeback is unclear. The government and Faucett's employees are its biggest creditors. They have said they will proceed without Leigh. Peruvians are still fond of the 70-year-old airline, and aviation officials say if it survives receivership it can have its old routes back. Faucett has already announced an alliance with EVA Airways on future flights between Peru and the USA.

But the prospect of three Peruvian carriers - AeroPeru, AeroContinente and Faucett - flying the Lima-Miami route has hit another snag. Fine Air has asked the US Department of Transportation (DoT) to deny AeroContinente's request until Peru approves Fine's request to serve Lima. Fine claims it has been in limbo since Lima queried whether Fine was supplying guns to Ecuador several years ago during its border war with Peru.

On the theory that one stale claim deserves another, Fine Air revived allegations of drug trafficking by AeroContinente's former owner, Fernando Zevallos. The US drug enforcement agency has since dropped its investigation of Zevallos, but Lima remains nervous about the charges.

For the second time in as many years, reports have circulated that AeroContinente was grounded. Officials have ruled that a transfer by Zevallos of his AeroContinente shares to his mother was improper while he was under investigation, but a recent audit of the airline showed that its revenue came solely from commercial operations. In any event, AeroContinente has survived the rumours and is still flying. Its Washington DC lawyer insists the airline has a right to its US licence, but he will not predict when the DoT will grant it.

Commenting on this penchant for false rumours, Maria Garrido, a Latin aviation consultant based on Long Island, explains: "Aviation 'experts' in Peru come from any of the defunct airlines and seem to resent the surviving carriers."

New airlines quickly rise to replace defunct ones. Peru's latest start-ups are Sudamericana de Aviacion, which is recruiting flightcrews even before it gains route authority. Former executives from failed Americana incorporated Sudamericana. The other start-up is Trans Am, which is really a restart after closing earlier this year. This time it has an alliance with Central America's Taca group.

Domestic start-ups face a new threat. On 2 October Peru enacted a law allowing foreign airlines to serve domestic routes either on their own or under contract with local airlines. The next day LanChile announced plans to set up a new carrier, 80% Chilean owned, called LanPeru. It plans to serve domestic routes with turboprops and jets. Garrido, a native of Peru, warns: "This is going to be the end of Peruvian aviation."

Source: Airline Business