MARIO FONSECA / RIO DE JANEIRO
Shareholders in Colombian carrier Avianca have voted to postpone a merger with Aces Colombia until government concerns are resolved. The move comes amid reluctance by the Colombian Government to go ahead with cutting fuel prices and curbing existing taxes on airfares and related services to ease the two carriers' financial positions.
The government has reservations regarding certain aspects of the proposed merger, which was first announced in April. With no guarantees that the union will be sanctioned by the government, Avianca shareholders opted to delay the merger until Colombia's ministry of industry and commerce is satisfied it will not create a monopoly in the domestic market.
Avianca's continued survival is dependent upon a merger with Aces Colombia, the country's second largest airline. Registering $187 million losses last year, Avianca's debts increased to $567.1 million by the first quarter of 2001 despite an infusion of $180 million over the last two years made by main shareholder Valores Bavaria. Avianca shareholders must inject an estimated $68.5 million prior to a merger, but they will invest new funds only once the merger receives government sanction.
Posting a meagre profit in 2000, Aces Colombia needs to form strategic alliances with international partners to allow it to grow. That objective has been inhibited by current financial difficulties.
Source: Flight International
