Identifier
Created
Classification
Origin
06LAPAZ1518
2006-06-05 20:48:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy La Paz
Cable title:  

LLOYD: CLOSER TO COLLAPSE

Tags:  EAIR ECON PGOV CASC BL 
pdf how-to read a cable
VZCZCXYZ0000
RR RUEHWEB

DE RUEHLP #1518 1562048
ZNR UUUUU ZZH
R 052048Z JUN 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 9453
INFO RUEHAC/AMEMBASSY ASUNCION 5896
RUEHBO/AMEMBASSY BOGOTA 3208
RUEHBR/AMEMBASSY BRASILIA 7057
RUEHBU/AMEMBASSY BUENOS AIRES 4311
RUEHCV/AMEMBASSY CARACAS 1604
RUEHPE/AMEMBASSY LIMA 1596
RUEHME/AMEMBASSY MEXICO 1712
RUEHMN/AMEMBASSY MONTEVIDEO 3824
RUEHQT/AMEMBASSY QUITO 4238
RUEHSG/AMEMBASSY SANTIAGO 8784
RUEANHA/FAA NATIONAL HQ WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
UNCLAS LA PAZ 001518 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/TRA JHORWITZ AND EB/TRA/OTP BMATTINGLEY
STATE ALSO FOR WHA/AND LPETRONI
STATE PASS TO FAA FOR CCAPESTANY
STATE PASS TO DOT FOR CCOLDREN
COMMERCE FOR JANGLIN

E.O. 12958: N/A
TAGS: EAIR ECON PGOV CASC BL
SUBJECT: LLOYD: CLOSER TO COLLAPSE

REF: LA PAZ 1078

UNCLAS LA PAZ 001518

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/TRA JHORWITZ AND EB/TRA/OTP BMATTINGLEY
STATE ALSO FOR WHA/AND LPETRONI
STATE PASS TO FAA FOR CCAPESTANY
STATE PASS TO DOT FOR CCOLDREN
COMMERCE FOR JANGLIN

E.O. 12958: N/A
TAGS: EAIR ECON PGOV CASC BL
SUBJECT: LLOYD: CLOSER TO COLLAPSE

REF: LA PAZ 1078


1. (SBU) Summary: Bolivia's national airline, Lloyd Aero
Boliviano, moved closer to collapse following the chief
executive's failed attempt to relinquish ownership to
employees. In a bizarre turn of events June 3, disgruntled
pilots accosted two members of the company's board of
directors and held them hostage for four hours; one of the
hostages was Cochabamba Consular Agent William Scarborough,
who was acting in his capacity as president of Lloyd's audit
committee. Scarborough told the Ambassador the
hostage-taking was not related to his affiliation with the
Embassy but seemed to stem from the increasing radicalism of
Lloyd's pilots' union. Scarborough added that there was
little hope the airline could avoid bankruptcy. End summary.


2. (SBU) Bolivia's national airline, Lloyd Aero Boliviano,
moved closer to collapse late last week, following Chief
Executive Ernesto Asbun's failed attempt to transfer his 52
percent ownership of the firm to employees. According to
Paula McKenzie, Lloyd's Regional Manager for La Paz and
Cochabamba, Asbun agreed to relinquish his shares free of
charge - partly as a result of workers' failure to raise the
$1.5 million needed for the transaction - in return for
protection from criminal prosecution and freedom from company
liabilities. The pilots' union objected to the transfer of
shares to all employees, apparently seeking to exclude
workers loyal to Asbun and assume control of the airline
themselves.


3. (SBU) In a bizarre turn of events June 3, disgruntled
pilots accosted two members of the company's board of
directors at Cochabamba's Hotel Portales and held them
hostage for four hours; one of the hostages was Cochabamba
Consular Agent William Scarborough, who was acting in his
capacity as president of Lloyd's audit committee. A
200-strong crowd of protesters smashed the windows of
Scarborough's car and physically attacked his colleague,
Acting President of the Board Javier Jimenez. Police
eventually intervened, and both men were released.


4. (SBU) Scarborough told the Ambassador and Econoff June 5
that the hostage-taking was not related to his affiliation
with the Embassy but seemed to stem from the increasing
radicalism of Lloyd's pilots' union. According to both
Scarborough and McKenzie, Lloyd executives now find it almost
impossible to negotiate with the group, whose members have
reportedly occupied company offices, threatened the lives of
Lloyd executives, and prevented many from going to work.
Both said the hostage-taking would likely hinder attempts to
save the airline from bankruptcy, as it had further disrupted
operations and would undermine efforts to reach an amicable
solution.


5. (SBU) Comment: Given Lloyd's dire situation, it is hard to
see how it might survive. According to McKenzie, the carrier
is operating only three aircraft - down from eight earlier
this year - and has cancelled international flights and many
domestic services. Revenues have dropped 80 percent since
December 2005, and monthly losses of $5 to $6 million have
deepened multi-million dollar debts to Bolivian pension funds
and government entities, Lloyd employees, insurance firms,
suppliers, and U.S. aircraft leasing companies. Lloyd is
unable to pay for fuel and will likely forfeit its aircraft
insurance policy, now set to expire June 15. If this
happens, the carrier will lose its legal authority to operate
aircraft, and bankruptcy may remain its only option - to the
dismay of its more than 2,200 employees. End comment.
GREENLEE