AIRLINES SEEK TO EXPLOIT LLOYD'S TROUBLES

UNCLAS LA PAZ 001923 SIPDIS SENSITIVE SIPDIS STATE FOR EB/TRA/OTP BMATTINGLEY AND EB/TRA AHERRUP STATE ALSO FOR WHA/AND LPETRONI STATE PASS TO FAA FOR CCAPESTANY AND KBERQUIST STATE PASS TO DOT FOR CCOLDREN AND BHEDBERG COMMERCE FOR JANGLIN E.O. 12958: N/A TAGS: EAIR ECON PGOV BL SUBJECT: AIRLINES SEEK TO EXPLOIT LLOYD'S TROUBLES REF: LA PAZ 1629 (AND PREVIOUS) ¶1. (SBU) Summary: As Lloyd Aereo Boliviano struggles, American Airlines and AeroSur seek to expand. American plans to add La Paz-Miami flights in August and September, and AeroSur hopes to operate public charters to Miami from late July. Both see opportunities in Lloyd's near-complete departure from international and domestic markets, and both believe high demand will make additional flights lucrative. End summary. ¶2. (SBU) Bolivia's national airline, Lloyd Aereo Boliviano, continues to struggle (reftel). It is reportedly down to three planes and is operating sporadically; Superintendent of Transportation Wilson Villarroel told EconOff July 7 that dramatically lower cash flows have made paying for fuel and aircraft insurance difficult. Despite extensions, the carrier has failed to pay for its insurance and is unlikely to win future concessions. According to Villarroel, company leadership and salvation plans are nonexistent - a workers' committee supposedly controls the airline, and the chief executive is in hiding - and chances of survival are slim. ¶3. (SBU) Against this backdrop, American Airlines and AeroSur seek to expand. American Airlines Country Director Drago Komadina confirmed July 12 that the carrier would add a second La Paz-Miami flight on Fridays, Saturdays, and Sundays in August and September and consider continuing the schedule through November. If all goes well, Komadina said, the airline could make the additional flights permanent in December. ¶4. (SBU) AeroSur, meanwhile, now Bolivia's principal domestic carrier, hopes to operate public charters from late July. Company executives told EconOff July 12 that the firm had established a U.S. subsidiary, AeroSur USA, Inc., and expected to lease Boeing 757 aircraft and crew from Ryan International Airlines, a Wichita-based supplemental air carrier. After signing lease agreements, arranging additional lines of credit, and securing final approval from U.S. authorities, AeroSur plans to operate charters to Miami three times a week; later, company executives plan to seek permission to provide regular passenger services. ¶5. (SBU) Comment: American Airlines and AeroSur both see opportunities in Lloyd's near-complete departure from international and domestic markets, and both believe high demand will make additional flights lucrative. American's daily flights are full, and demand for seats easily exceeds supply. While AeroSur's entrance into U.S. markets is far from certain, its success would bring new choice - and possible price reductions - to a market American has long dominated. End comment. GREENLEE