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AeroContinente seeks stronger role

Peru's AeroContinente is determined to take its place beside LanChile, TAM, and Grupo TACA as a regional Latin American player.

To get there it is not afraid to tread on a few toes. It has filed a $1 billion lawsuit against the government of Chile based on last year's grounding of its subsidiary on money laundering charges. AeroContinente Chile claims its 75-day grounding, later reversed on appeal, damaged its reputation, wiped out its market share, and thwarted its parent's bid for a stake in Aerolineas Argentinas.

Peru's acquittal of AeroContinente's founder, Fernando Zevallos, seems to have emboldened the airline to expand. It claims to have plans for Bolivia and Argentina. It has formed a subsidiary in the Dominican Republic and is applying to Washington for rights to link Santo Domingo with Miami and New York. This puts it in competition with several other carriers, notably Pan American World Airways and Venezuela's Aeropostal, who are considering the same thing.

AeroContinente is also on a major collision course with LanChile in Ecuador. After Ecuatoriana's jets were repossessed in late 2000, LanChile offered to operate flights on its behalf to the USA. It now uses Ecuatoriana rights from Quito to Miami and New York. LanChile has no interest in buying the moribund Ecuatoriana. Enrique Cueto, LanChile's chief executive, claims buying it would simply pay off old debts and thus pay for its former owners' mistakes.

But now AeroContinente is offering to buy Vasp's controlling stake in Ecuatoriana and is meeting with Ecuadorian officials to discuss the terms for a takeover. LanChile scoffs at this proposal, but if Quito accepts it, AeroContinente could replace LanChile on the US routes. Now that Washington has confirmed Peru's category 1 status, AeroContinente has a green light for expansion into the USA.

Aerocontinente has offered the Ecuadorean Government $7.1 million over four years, plus the assumption of $35 million of debt, for a majority stake in Ecuatoriana. It is seeking a 70% holding, leaving 25% of Ecuatoriana in state hands and 5% with private local investors.

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