Identifier
Created
Classification
Origin
06LAPAZ567
2006-03-03 20:34:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy La Paz
Cable title:
BOLIVIAN NATIONAL AIRLINE FIGHTS FOR SURVIVAL
how-toVZCZCXYZ0000 RR RUEHWEB DE RUEHLP #0567/01 0622034 ZNR UUUUU ZZH R 032034Z MAR 06 FM AMEMBASSY LA PAZ TO RUEHC/SECSTATE WASHDC 8286 INFO RUEHAC/AMEMBASSY ASUNCION 5638 RUEHBO/AMEMBASSY BOGOTA 2905 RUEHBR/AMEMBASSY BRASILIA 6776 RUEHBU/AMEMBASSY BUENOS AIRES 3997 RUEHCV/AMEMBASSY CARACAS 1343 RUEHPE/AMEMBASSY LIMA 1248 RUEHME/AMEMBASSY MEXICO 1662 RUEHMN/AMEMBASSY MONTEVIDEO 3594 RUEHQT/AMEMBASSY QUITO 3978 RUEHSG/AMEMBASSY SANTIAGO 8499 RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC RUEAYVF/FAA MIAMI ARTCC MIAMI FL RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
UNCLAS LA PAZ 000567
SIPDIS
SENSITIVE
SIPDIS
STATE FOR EB/TRA JHORWITZ AND EB/TRA/OTP BMATTINGLEY
STATE ALSO FOR WHA/AND LPETRONI
STATE PASS TO FAA MIAMI FOR LHART
STATE PASS TO DOT FOR CCOLDREN
COMMERCE FOR JANGLIN
E.O. 12958: N/A
TAGS: EAIR ECON PGOV BL
SUBJECT: BOLIVIAN NATIONAL AIRLINE FIGHTS FOR SURVIVAL
REF: LA PAZ 351
UNCLAS LA PAZ 000567
SIPDIS
SENSITIVE
SIPDIS
STATE FOR EB/TRA JHORWITZ AND EB/TRA/OTP BMATTINGLEY
STATE ALSO FOR WHA/AND LPETRONI
STATE PASS TO FAA MIAMI FOR LHART
STATE PASS TO DOT FOR CCOLDREN
COMMERCE FOR JANGLIN
E.O. 12958: N/A
TAGS: EAIR ECON PGOV BL
SUBJECT: BOLIVIAN NATIONAL AIRLINE FIGHTS FOR SURVIVAL
REF: LA PAZ 351
1. (U) Summary: Since the end of an early February pilots'
strike (reftel),Lloyd Aero Boliviano has encountered a
string of difficulties. Two U.S.-based firms, Aviation
Capital Group and Pegasus Aviation, have repossessed or are
in the process of repossessing leased aircraft, and the GOB
has made it clear it will not provide financial assistance,
instead authorizing a comprehensive audit to determine the
extent of Lloyd's financial problems. While ticket sales
continue to fall, Lloyd limps along, with employees and
outside observers uncertain about its future but expecting
the worst. End summary.
2. (SBU) Since the GOB intervened February 9 to end an
eight-day pilots' strike (reftel),Lloyd Aero Boliviano,
Bolivia's flag carrier, has encountered a string of
difficulties. On February 24, the company returned one of
two leased Boeing 727-200 jets to U.S.-based Aviation Capital
Group, whose executive vice president told Econoff that Lloyd
was significantly behind in its lease payments. The two
firms agreed to a revised payment scheme a week before the
pilots' strike, but the flight disruptions and subsequent
loss of revenue made it impossible for Lloyd to fulfill its
obligations. The loss of the aircraft reduced Lloyd's fleet
of operating planes to five and placed new limits on its
ability to provide service to Brazil, Argentina, and Mexico.
Aviation Capital Group executives said they would repossess
the firm's remaining aircraft as soon as Lloyd completes
routine airbody maintenance work, which representatives
expect the week of March 13.
3. (SBU) Another U.S.-based firm, Pegasus Aviation, is in the
process of repossessing all four Boeing jets Lloyd leases
from the company. The firm's deputy general counsel told
Econoff that Lloyd returned two planes several months ago but
owes significant amounts of money on both leases and is well
behind on lease payments for the remaining aircraft. Pegasus
Aviation's local counsel has filed aircraft deregistration
requests with the Bolivian Civil Aviation Authority and is
awaiting a response; if the requests are approved, the
company will move ahead with the repossessions. According to
company executives, Pegasus Aviation will also consider
filing suit in U.S. courts to recover Lloyd's outstanding
debts.
4. (U) Meanwhile, the GOB has made it clear it will not
provide financial assistance, instead authorizing a
comprehensive audit to determine the extent of Lloyd's
financial problems. The company has not issued financial
reports since 2003, so asset value and insurance and pension
fund debts (estimated by some observers at almost $30
million) are unknown. Lloyd's cash flow has been undercut by
dwindling passenger loads and limited flight schedules,
further undermining its accounts and forcing the
GOB-appointed controller to try to reschedule debt payments
and pursue special arrangements with the few suppliers still
willing to work with the airline.
5. (SBU) Comment: Customers' confidence in Lloyd, long
undermined by its reputation for unreliability, has fallen
still further, with ticket sales down as much as 50 percent.
Unable to fill its seats, Lloyd limps along, with employees
and outside observers uncertain about its future but
expecting the worst. The carrier's financial health and
ability to maintain its aircraft and operate normally are in
doubt, and many believe the airline will fail unless it
receives a significant capital injection from the GOB or
company shareholders, which is highly unlikely. If Lloyd
does fail, American Airlines will be the sole carrier serving
Miami, leaving travelers and exporters to compete for seats
and cargo space. With angry creditors, a detached
government, and a skeptical public, Lloyd's future is shaky
at best. End comment.
GREENLEE
SIPDIS
SENSITIVE
SIPDIS
STATE FOR EB/TRA JHORWITZ AND EB/TRA/OTP BMATTINGLEY
STATE ALSO FOR WHA/AND LPETRONI
STATE PASS TO FAA MIAMI FOR LHART
STATE PASS TO DOT FOR CCOLDREN
COMMERCE FOR JANGLIN
E.O. 12958: N/A
TAGS: EAIR ECON PGOV BL
SUBJECT: BOLIVIAN NATIONAL AIRLINE FIGHTS FOR SURVIVAL
REF: LA PAZ 351
1. (U) Summary: Since the end of an early February pilots'
strike (reftel),Lloyd Aero Boliviano has encountered a
string of difficulties. Two U.S.-based firms, Aviation
Capital Group and Pegasus Aviation, have repossessed or are
in the process of repossessing leased aircraft, and the GOB
has made it clear it will not provide financial assistance,
instead authorizing a comprehensive audit to determine the
extent of Lloyd's financial problems. While ticket sales
continue to fall, Lloyd limps along, with employees and
outside observers uncertain about its future but expecting
the worst. End summary.
2. (SBU) Since the GOB intervened February 9 to end an
eight-day pilots' strike (reftel),Lloyd Aero Boliviano,
Bolivia's flag carrier, has encountered a string of
difficulties. On February 24, the company returned one of
two leased Boeing 727-200 jets to U.S.-based Aviation Capital
Group, whose executive vice president told Econoff that Lloyd
was significantly behind in its lease payments. The two
firms agreed to a revised payment scheme a week before the
pilots' strike, but the flight disruptions and subsequent
loss of revenue made it impossible for Lloyd to fulfill its
obligations. The loss of the aircraft reduced Lloyd's fleet
of operating planes to five and placed new limits on its
ability to provide service to Brazil, Argentina, and Mexico.
Aviation Capital Group executives said they would repossess
the firm's remaining aircraft as soon as Lloyd completes
routine airbody maintenance work, which representatives
expect the week of March 13.
3. (SBU) Another U.S.-based firm, Pegasus Aviation, is in the
process of repossessing all four Boeing jets Lloyd leases
from the company. The firm's deputy general counsel told
Econoff that Lloyd returned two planes several months ago but
owes significant amounts of money on both leases and is well
behind on lease payments for the remaining aircraft. Pegasus
Aviation's local counsel has filed aircraft deregistration
requests with the Bolivian Civil Aviation Authority and is
awaiting a response; if the requests are approved, the
company will move ahead with the repossessions. According to
company executives, Pegasus Aviation will also consider
filing suit in U.S. courts to recover Lloyd's outstanding
debts.
4. (U) Meanwhile, the GOB has made it clear it will not
provide financial assistance, instead authorizing a
comprehensive audit to determine the extent of Lloyd's
financial problems. The company has not issued financial
reports since 2003, so asset value and insurance and pension
fund debts (estimated by some observers at almost $30
million) are unknown. Lloyd's cash flow has been undercut by
dwindling passenger loads and limited flight schedules,
further undermining its accounts and forcing the
GOB-appointed controller to try to reschedule debt payments
and pursue special arrangements with the few suppliers still
willing to work with the airline.
5. (SBU) Comment: Customers' confidence in Lloyd, long
undermined by its reputation for unreliability, has fallen
still further, with ticket sales down as much as 50 percent.
Unable to fill its seats, Lloyd limps along, with employees
and outside observers uncertain about its future but
expecting the worst. The carrier's financial health and
ability to maintain its aircraft and operate normally are in
doubt, and many believe the airline will fail unless it
receives a significant capital injection from the GOB or
company shareholders, which is highly unlikely. If Lloyd
does fail, American Airlines will be the sole carrier serving
Miami, leaving travelers and exporters to compete for seats
and cargo space. With angry creditors, a detached
government, and a skeptical public, Lloyd's future is shaky
at best. End comment.
GREENLEE