The opening of the bidding for Bolivia's LAB and what remains of Ecuatoriana should bring to a close the troubled airline privatisation process in Latin America. Consolidation could be the emerging trend, as evidenced by events in Chile and Peru.
Advisers for both LAB and Ecuatoriana are placing much emphasis on the fact that the two carriers are the only remaining airlines in Latin America with no degree of private ownership. Though this 'last on the lot' sales pitch could be enticing, Mario Burbano, executive president of Ecuatoriana charged with selling the dormant carrier, acknowledges the history of airline privatisation in the region does not help matters. 'It has been a flop,' he declares, pointing towards the glaring example of Iberia's troubled investments in Aerolineas Argentinas and Viasa of Venezuela. 'But we have taken steps to clean the slate. Unlike Aerolineas, there are no hidden liabilities.'
It could be argued that the only hidden thing in Ecuatoriana's case is an airline. The carrier ceased operations in 1993, and the 'clean slate' includes no unions (no workers), no debt and one aircraft, a DC-10-30. Combined with property and ground equipment, this gives the carrier an asset value of $18 million. Private Ecuadorian carrier Saeta has vociferously opposed the entire privatisation, complaining that privatising a dead company violates free-market principles.
Burbano argues the Ecuadorian government has 'a right to recoup its investment,' adding that the bidding floor will be $10 million (in cash or in kind) for the company and rights to 30 international routes. On offer is 50.1 per cent of the airline; the government will sell another 24.9 per cent later. By early June, nine groups had applied to enter bids, including Aces Colombia, Continental Airlines, Avro, and Vasp of Brazil. Burbano hopes the process will be finished by August.
While Ecuatoriana is attempting to sell itself as a South American gateway carrier, LAB is pushing its central location of Santa Cruz as a potential regional hub for the southern cone of South America. The Bolivian carrier has the immediate benefit of actually being in business. However, losses of $27 million since 1992 dull the attraction. The company's unencumbered asset value of $30 million compensates, although it is too soon to tell which parties will be interested when bidding, again in cash or in kind, starts in July.
Free-market proponents hope privatisation will usher in a consolidation within Latin America's fractured, poorly performing airline industry. 'No one thought that privatisation was a panacea,' says Uli Bauer, vice president at consultants SH&E and advisor to LAB. 'It's a transition. Maybe the next stage is consolidation. There are a lot of talks going on between airlines.'
Most high profile are merger plans between Chile's LanChile and Ladeco, which appear to be close to gaining permission from the country's anti-monopolies commission, which has blocked past attempts at consolidation.
Sources also indicate that El Salvador's Taca consortium, Peru's Faucett and LanChile are all seriously interested in buying AeroPeru from Aeromexico, which bought the smaller carrier in 1993 and has lost an estimated $50 million on the investment.
Elsewhere, Caribbean carrier BWIA is planning to take a 30 per cent stake in regional carrier Liat - the latest privatisation in that region.
Source: Airline Business
