Mario Fonseca / Rio de Janeiro

The fast-growing Chilean subsidiary of Peru's Aero Continente has suspended operations after six of its aircraft were impounded by Chile as part of an extensive money-laundering and drug-smuggling investigation (Flight International, 24-30 July).

The impounding of five Boeing 737-200s and a Boeing 767-200 operated by Aero Continente Chile was accompanied by the arrest of four key Aero Continente executives and the closure of 15 offices in Chile.

The suspension follows a two-year Chilean probe against Aero Continente's founder, Fernando Zevallos, and Aero Continente Chile. Although residing in the USA, Zevallos was previously convicted by the Peruvian courts of money-laundering for one of Peru's largest drug cartels. Zevallos relinquished command of Aero Continente when his sister Lupe Zevallos took over as president in 1995.

The Chilean carrier came under government scrutiny after discrepancies were uncovered in the company's request to authorise the local operation of 16 leased aircraft without it apparently having sufficient financial assets.

Aero Continente Chile's market share has almost doubled in 12 months to nearly 13% this year amid accusations by rivals of predatory pricing. Although apparently running at a loss, Aero Continente Chile was on the verge of expanding its activities.

Lupe Zevallos denies the charges and is threatening to sue the Chilean Government, suggesting the action was spurred by Chilean rivals. The move would appear to have destroyed its bid to acquire Aerolineas Argentinas.

Source: Flight International