American Airlines is heating up the Latin American market, forcing its agenda in Colombia while signing up the El Salvador-based Taca consortium of airlines to an extensive codesharing pact that the new partners hope will end with antitrust immunity and US-Central America open skies. This may be the first of many Latin American alliances for American, which dominates air services to the region from the US.

In early July the US tentatively imposed sanctions against Colombia because in April the Colombian government turned down American's application for a new New York-Bogota service. American, which has three daily Miami-Bogota services, had operated the New York route briefly in 1993, but under Colombian use-it-or-lose-it provisions was required to reapply for the route. It refused to do this, saying that it had full rights to implement the service under the existing bilateral.

At presstime, Columbia and the US were to meet either to resolve their differences or to launch themselves into tit-for-tat sanctions focusing on the New York-Bogota route. The dispute comes just months after Continental Airlines began serving Bogota from its New York/Newark hub, in competition with Avianca.

Colombia has shown a willingness to open its markets to US carriers in the past three years, especially in the cargo area. Colombia's cut-flower industry has supplied lucrative markets to five US cargo carriers, with two more - Fine Air and FedEx - now also applying pressure. However, the US has restricted Colombian carrier' access to the US by giving the country's aviation regulatory structure a Category 2 rating. Airlines from Category 2-rated countries are not permitted to start new services to the US.

Ironically, while American has been pushing for sanctions it has also been talking to Avianca about establishing a codesharing alliance, sources say. American has been pushing itself as an alliance partner throughout Latin America in the past several months, particularly focusing on Chile and Argentina. This has caused consternation because American is seen by indigenous airlines as the key threat to the lucrative US market.

So it was a major coup for American to sign an extensive alliance with the five-carrier Taca consortium, comprising Guatemala's Aviateca, Copa of Panama, Cost Rica's Lacsa, Nica of Nicaragua, and Taca de Honduras. The alliance will involve 149 weekly flights from the US to the 10 cities in Central America served by the Taca group. Considered a 'seminal event' for a new era in the Latin American airline industry by an industry official, the alliance also includes extensive rights for AMR Corp's Sabre Travel Information Network to sell its service in Central America. Earlier this year, Taca had intended to agree limited codesharing with Continental but a deal was never finalised, leaving the carrier free to pursue a strategic alliance with American.

Industry observers consider the alliance an intentionally high profile attempt by American to set a precedent in the region. Headed by Federico Bloch, Taca is considered as a vanguard airline in the region and is much emulated. A linkup with American could give Taca a big boost in traffic through its access to American's US domestic system. One question remains for the future, however. How independent will Taca remain if the alliance obtains antitrust immunity?

Mead Jennings

Source: Airline Business