Continental Airlines is seeking to sooth its disappointment over losing Aerolineas Argentinas to American with a bid for a stake in Colombia's Aces Airlines. If successful, its purchase would underscore the recently forged links between the two carriers and Continental's commitment to developing its Latin American strategy.
Aces' owners, the Colombian Coffee Growers' Group, has invited bids for a minority or majority stake from a strategic investor. Continental is the first into the ring after signing a marketing agreement with Aces. The deal covers frequent flyer programme links and codesharing on flights between Bogota and Quito, but not US-Colombia sectors. Aces will also act as Continental's agent in Colombia. The US carrier has limited the scope of the alliance to prevent conflict with its opposition to the proposed American Airlines-Avianca link-up which includes codesharing on US sectors.
Juan Emilio Posada, Aces' president and chief executive, says the bid evaluation will be based 'not only on price, but also synergies and compatibility.' He adds: 'Our goal is not just to raise money, but to find the best strategic partner.'
The Coffee Growers' Group has hired Deutsche Morgan Grenfell (DMG) to advise on the sale. The growers have asked for bids in the range of 30 to 49 per cent or 97 per cent-plus for a majority stake. Eduardo Barco, DMG's managing director in Bogota, says the owners, who funded a capital increase earlier this year, do not want to retain a minority stake. 'We have had interest from airlines and local private equity and pension funds,' says Barco. Overseas emerging market investors are also in the frame and bids were due in by 24 October.
Aces is already listed on the Bogota stock exchange for trading between the coffee groups and a share issue is being considered next year after the strategic sale. 'We hope to have a final, final agreement with money in the pocket before the end of the year,' says Posada. DMG and the airline decline to discuss a potential sale price for Aces, which earned $5.3 million on sales of $170 million in 1996.
The proceeds will be used to finance Aces' fleet renewal. The first two of four A320s on order arrive in November and the carrier has options on four more. 'Clearly we foresee that we will order all eight,' says Posada.
However, the use of the new aircraft is restricted by Colombia's Category 2 rating by the US Federal Aviation Administration, which freezes capacity on US sectors (see story opposite). Aces would like to use the A320s on Miami sectors during high season and weekends and continue to operate B727-200s at other times. But that would mean registering more aircraft with the FAA than it now allows. Posada says the Colombian authorities are lobbying US officials.
US expansion remains restricted on other sectors. The US and Colombian authorities agreed last year that Colombia could add seven weekly US frequencies, despite its Category 2 rating. Posada says only four were allocated - two each to Aces and Avianca - and claims Colombian officials remain split between those advocating competition and those with loyalties to Avianca. 'We're asking for them again,' he says.
Aces has also agreed a commercial alliance with Air France, similar to the Continental deal, with frequent flyer reciprocity, codesharing between Bogota and Quito, and Aces acting as agent for the French carrier.
Source: Airline Business
