VZCZCXYZ0000
RR RUEHWEB

DE RUEHBO #0958/01 0781814
ZNR UUUUU ZZH
R 191814Z MAR 09
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 7871
INFO RUEHCV/AMEMBASSY CARACAS 1859
RUEHBR/AMEMBASSY BRASILIA 8747
RUEHPE/AMEMBASSY LIMA 7178
RUEHLP/AMEMBASSY LA PAZ MAR PANAMA 3243
RUEHQT/AMEMBASSY QUITO 7904
RHMFIUU/FAA NATIONAL HQ WASHINGTON DC

UNCLAS BOGOTA 000958 
 
SIPDIS 
SENSITIVE 
 
EEB/TRA FOR DHUTCHENS AND TROCHE; PASS TO DOT BHEDBERG 
 
E.O. 12958: N/A 
TAGS: EAIR EINV ECON PGOV ETRD EFIN CO
SUBJECT: COLOMBIA'S NATIONAL AIRLINE: BRACING FOR THE 
CRISIS AND INCREASED COMPETITIVENESS 
 
REF: 08 BOGOTA 4312 
 
¶1. (SBU) SUMMARY.  Amid worsening economic conditions, 
Colombia's national airline, Avianca, is re-assessing its 
routes and frequencies for 2009.  The company has already 
postponed planned route additions and fleet acquisitions. 
Meanwhile, Avianca still expects to receive 13 new Airbus 
planes in 2009 and take possession of the first of its 12 
Boeing 787 Dreamliners in 2012.  The carrier acquired Tampa 
Cargo in 2008 to diversify its operation, and is reportedly 
considering acquiring its main Ecuadorian competitor, 
AeroGal, during the year.  Avianca contacts tell us, however, 
they are concerned with falling fare prices and the company's 
ability to compete in a market that is more open than ever 
before.  END SUMMARY. 
 
Tough Year Ahead, Especially With Dropping Fares 
--------------------------------------------- --- 
 
¶2. (SBU) Avianca president Fabio Villegas said publicly that 
Avianca is assessing its routes and frequencies, given the 
massive losses the industry expects in 2009.  Avianca 
Aeronautical Affairs Director Susana Mantilla confirmed this 
but noted that the company is still in the analysis stage and 
has not yet changed operations.  Mantilla added that the main 
impact of the crisis so far has been fare reductions rather 
than a drastic drop in demand.  She said Colombians are still 
traveling, both nationally and internationally, but 
complained that the financial crisis combined with increased 
competition has forced Avianca to offers fares that threaten 
the company's profitability. 
 
Avianca Fleet Expansion Plans Continue 
-------------------------------------- 
 
¶3. (SBU) Despite these difficulties, Villegas announced that 
Avianca will continue with its 2009 fleet modernization 
plans.  Avianca will incorporate 13 new airplanes (three 
Airbus 330, and the rest Airbus 319 and 320) in 2009, with 
gasoline consumption and maintenance costs estimated at 25 
percent lower with these modern planes.  Mantilla told us 
that while the present fleet modernization of 
already-purchased equipment will continue, plans for future 
equipment purchases and new routes are on hold.  She noted 
that Boeing's production lags also impair Avianca's plans, as 
the company had hoped to increase flights to Europe and 
expand to Asia after receiving the 12 Boeing 787s on order. 
Avianca had hoped to receive its first 787 Dreamliner in 2010 
but now does not expect the first plane until 2012 or 2013, 
with the remainder of the order arriving sometime before 
¶2015.  Mantilla considers Europe to be the market with the 
most potential for expansion with their enhanced fleet 
capabilities. 
 
Future Corporate Acquisitions On The Horizon? 
--------------------------------------------- 
 
¶4. (SBU) To increase diversification, Avianca acquired 
all-cargo carrier Tampa Cargo in 2008 (NOTE: Tampa Cargo is 
based in Medellin, specializing in flower transport from 
Latin America to Miami.  END NOTE).  The deal is intended to 
expand Avianca's market profile, as well as its service 
offerings.  Rumors have also circulated in recent months that 
Colombian-Brazilian owned Synergy Group -- the primary 
shareholder of Avianca -- will acquire 80 percent of its main 
Ecuadorian competitor, AeroGal.  According to AeroGal's 
representative in Colombia Patricia Amador, Avianca controls 
approximately 65 percent of the traffic between Colombian and 
Ecuador, with AeroGal following at 34 percent (the remaining 
1 percent split between COPA and LAN).  Amador told us she 
believes the acquisition will occur as the two companies have 
already begun plans to link their operations.  Mantilla 
refused to confirm, asserting that Synergy Group-Aerogal 
acquisition talks are only rumor. 
 
COMMENT: Increased Competitiveness Will Exacerbate Crisis 
--------------------------------------------- ------------ 
 
¶5. (U) According to Colombia's Aviation Authority, December 
2008 - January 2009 holiday season airline travel dropped by 
27 percent in Colombia and our airline contacts expect 
further reductions when the February - March 2009 figures are 
 
released.  While every airline is bracing for a difficult 
year, Avianca seems to be especially vulnerable.  In 
particular, the increased opening of the Colombian market to 
low-cost U.S. carriers (reftel) and delivery delays of 
equipment needed to diversify Avianca's operations stand to 
make the impact of declining air traffic even more acute for 
the national carrier. 
 
 
 
 
NICHOLS