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Watch the trailer at: http://www.foxsearchlight.com/theclearing/index_nyt.html \----------------------------------------------------------/ For Latin American Airlines, Shifting to Fit Times June 3, 2004 By JUAN FORERO CARACAS, Venezuela, June 2 - The announcement this week that a Brazilian investor would probably buy Avianca Airlines of Colombia highlights a growing trend in Latin America - the reinvention of airlines into sleeker, no-frills carriers and the consolidation of weaker airlines with financially stable carriers intent on becoming regional powers. Aerovías Nacionales de Colombia, better known as Avianca, said on Tuesday that its board had chosen an offer by the owner of OceanAir of Brazil to take over its financially troubled operations. If the offer is approved by a Federal Bankruptcy Court in New York, where Avianca filed for protection last year, the investor, German Efromovich, would control 75 percent of an airline that is entrenched in the Andes and strategically situated to serve North America. Mr. Efromovich and his Grupo Sinergy conglomerate hope to use Avianca to offer expanded services to Brazilians traveling from the northern half of that country, from cities like Recife and Salvador, to international destinations like New York. Travelers in that swath of Brazil now have to divert south to big airports in São Paulo and Rio de Janeiro before heading north. Mr. Efromovich would take control of a company that offers 300 flights a day, including service to Kennedy International Airport in New York and to Madrid and some of the largest cities in the Andes, including Caracas, Venezuela, and Lima, Peru. Avianca's assets would also help OceanAir - a domestic carrier serving 39 Brazilian cities - to extend its reach inside Latin America's largest country while offering the possibility of connections between Bogotá, Colombia, and important regional cities like Manaus, Brazil, in the Amazon. "There is a huge market north of Rio," said Bobby Booth, an aviation analyst in Miami and publisher of the newsletter, AVNews. "OceanAir is flying domestically in Brazil. He'd like to see Avianca come in, and he'd like to build on the connections Oce- anAir can bring." Avianca's board, in a statement on Tuesday, said it had chosen to go with the offer from Mr. Efromovich after considering a bid made in April by Continental Airlines and its Panamanian partner, Copa Airlines. Mr. Efromovich is offering to inject $64 million into Avianca and assume its $300 million debt. Continental's offer remains secret, but Avianca said the bid made by it and Copa was subject to "multiple conditions," one of them being that Copa would have to obtain a $50 million loan to pay Avianca's pension costs. Still, Avianca's reorganization plan allows Continental and Copa to improve their bid. The court in New York has given Avianca until June 11 to file its reorganization plan, though Avianca is asking for an extension. Avianca is one of the most recognizable names in Latin American air travel, but it has had little choice but to team with a stronger carrier. Whether it be Continental or Mr. Efromovich, it has long been clear that Avianca's merging with another airline was a foregone conclusion and part of a larger Latin American trend that has recently brought about increases in alliances and takeovers, and the emergence of cost-effective airlines looking to follow the model perfected by Southwest Airlines in the United States. Economic turmoil, high fuel costs and a steep downturn in passengers since the Sept. 11 attacks on the United States have hobbled and even closed airlines across Latin America. The few that have benefited have cut costs, have found niche markets like hauling cargo and have expanded beyond borders and the constraints of small economies. "They have found ways of accommodating themselves and making things work," said Tom Hansson, an airline analyst in Los Angeles with Booz Allen Hamilton, a global management consultant. "Airline operations need to cover more than one country." Among the airlines that have done well is Copa, which has used its partnership with one of the world's largest carriers, Continental, to expand service to 20 countries. In Argentina, Aerolíneas Argentinas says that it plans a five-year, $557.8 million upgrade of its fleet, leasing 49 used aircraft made by Boeing in a deal made affordable by the company's $44 million in profits last year. In Central America, Grupo Taca has continued to grow since 1997 when it united five small airlines from Costa Rica, El Salvador, Honduras, Guatemala and Nicaragua to serve a number of Latin American cities, as well as points in the United States like San Jose, Calif., and Miami. The April 26 murder of Grupo Taca's longtime chief executive, Federico Bloch, outside of San Salvador, where the company is based, is not expected to slow the company's long-term expansion plans, including its recent foray into South America, analysts said. In South America, LanChile has become Latin America's most successful airline, in part, by establishing subsidiaries in Peru, Ecuador and the Dominican Republic and using the increasingly well-known Lan brand name. LanChile reported profits of $48.1 million in the first quarter of 2004. In one of its biggest markets, Peru, LanChile has cut into the market share once enjoyed by the low-cost Peruvian carrier, AeroContinente. AeroContinente has already been hit hard this year by a strike, a Federal Aviation Administration ban on AeroContinente flights to the United States for "significant safety issues," and investigations into drug trafficking accusations against the airline's operators, the Zevallos family of Lima. http://www.nytimes.com/2004/06/03/business/worldbusiness/03latin.html?ex=1087272732&ei=1&en=19e8b3f7b7113d02 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! 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