Colombian Airline/Liquidated: 749 Employees Cut

Gordon Werner · 08-20-2003, 07:00 PM

Dow Jones Business News
Colombian Airline/Liquidated: 749 Employees Cut
Wednesday August 20, 6:52 pm ET

BOGOTA (Dow Jones)--Shareholders in Aerolineas Centrales de Colombia, or ACES, the second-largest Colombian airline, Wednesday decided in an unusual meeting to liquidate the company rather than seek to revive it through a government bankruptcy process.

According to a statement released by Alianza Summa, comprising Avianca , ACES and SAM airlines, Avianca will initially cover the routes operated by ACES, honoring the tickets and miles accumulated by ACES passengers.

"Evidently, the circumstances of the world aviation crisis were too serious," said Juan Emilio Posada, the president of Alianza Summa. "Although everything was done to remedy the effects, the reality of the situation overwhelmed us."

Posada said Alianza would retain 33% of ACES' workforce, or 523 people. But 749 employees will be let go.

Alianza Summa promised that the employees would be taken care of "under the conditions indicated by the law."

According to El Tiempo, Colombia's most prominent newspaper, Colombia's Federation of Coffee Growers, or Fedecafe, which owned 50% of the airline, was unwilling to bail it out. Fedecafe is enduring its own economic hardships because of low coffee prices around the world.

A release from Fedecafe and conglomerate Valores Bavaria , which owned the other half of ACES, said that it was impossible for the airline to take refuge in Colombia's "Law 550," or bankruptcy, proceedings because most of its debtors were in other countries.

Pending the decision by shareholders meeting in Medellin today, the Colombian Civil Aviation Authority grounded the airline from flying Wednesday morning. ACES flies domestic and international routes, including to Miami and Fort Lauderdale, Fla., Santo Domingo, Dominican Republic, and Lima, Peru.

Alianza Summa was created 18 months ago as a way of dealing with the financial problems due to world aviation troubles. Avianca has since filed for Chapter 11 bankruptcy protection in the U.S., an option unavailable to ACES.

One source confirmed that Alianza Summa would continue flying "normally" regardless of ACES' dissolution as the partnership is in name only.

Juan Camilo Restrepo, an ACES shareholder and member of Fedecafe, called investing in ACES a "bad negotiation," according to El Tiempo.

"Looking back, it was hit hard by all the episodes from Sept. 11, the decline in air traffic, the increase in the cost of gas, a series of phenomenon," Restrepo said.

Restrepo added that it was "absolutely impossible" for the coffee sector to invest "another single peso" in the failing airline.

The airline was $30 million in debt, which severely impacted its ability to continue renting its fleet of Airbus320 jets. The same source, who requested anonymity, said they would now be returned to the company.

In order to cut debt, ACES had already reduced its planes from 21 in May 2002 to five that operated until Tuesday.

But that simply wasn't enough to save the airline from being dissolved.

-By Rachel Van Dongen, Dow Jones Newswires; 571-600-1980; colombia@dowjones.com

08-20-2003, 07:06 PM

Of course, it's always a shame to see a good airline go down the pan, but it would appear that on this occasion it was for the best.

The loss-making operation by ACES was no doubt having a knock-on effect for SAM and Avianca and the board at Alianza obviously realised that the closure/liquidation of ACES would have a beneficial result for the other two airlines.

Better act now before all three airlines went down the pan.

Unicorn · 08-20-2003, 08:44 PM

Avianca is flirting with going down the drain, and deservedly so.

It has always been indifferently managed, and the current management team did not se any need to try and improve operational efficiency post 911.

When things got difficult they demanded their lessors unilaterally reduce rentals on the aircraft they had leased in.

Nothing about stepping the lease rentals back up later, or lease extensions to ensure that the lessors managed to make some money on the deals, it was "cough up or else".

When the lessors who had aircraft with them said "what else?", Avianca filed for Chapter 11 bankruptcy, despite not being a US airline or owned by a US company.

It claimed that as it had a minor subsiduary in the US, flew to the US and because most of its creditors were US based, then it could claim C11 protection.

Several of their lessors are fighting this in court, and I damned well hope they win. This is jurisdiction shopping of the worst kind.

If this manages to get past then every half-way dodgy airline will set up US "subsiduaries" so they can use the Chapter 11 rules to their advantage.

I don't want to see a great old airline go under, but I also don't want to see lease companies go down due to airlines dodging their responsibilities

Unicorn

08-20-2003, 08:56 PM

How about making a model of the airline now that it is gone??

08-20-2003, 09:21 PM

My insider/bookie in Bogota told me that the Avianca may close a very important office in one of the countries that flies to along with the route to that destination. It'd be very sad to see Avianca gone but it could be that some new investors would do what it was done to LanChile.
LanChile was a carcass that was reshaped completely from the check in counter to the planes along with ways to be operated. Now it seems to be the strongest airliner in South-America.

Regards!!!

dmbronner · 08-21-2003, 09:57 AM

As a Colombian I can say the following:
Aces was finished because the "Alianza Summa" was designed to dissapear this Airline. Before the integration with Avianca and Sam (Alianza Summa), Aces had a leadership in customer service, contrary to Avianca, who has a bad reputation for that. The problem was that Avianca has been a monopoly for more than 80 years, and with this integration with Aces, the bigger fish eaten the smaller. Now Avianca will continue with its monopolistic practices of bad service and higher fares.

justin · 08-21-2003, 01:15 PM

The practice of shopping around the worlds legal systems is a menace, not just the US chapter 11 laws but law suits trying to maximise damage awards often try and bring cases in US courts on the most tenuous grounds or the Belgian war crime laws and many other examples I'm sure,

Justin

08-20-2003, 07:00 PM	#1
Gordon Werner Insane Collector Join Date: Jun 1998 Location: Somewhere else Age: 37 Posts: 2,059	Colombian Airline/Liquidated: 749 Employees Cut Dow Jones Business News Colombian Airline/Liquidated: 749 Employees Cut Wednesday August 20, 6:52 pm ET BOGOTA (Dow Jones)--Shareholders in Aerolineas Centrales de Colombia, or ACES, the second-largest Colombian airline, Wednesday decided in an unusual meeting to liquidate the company rather than seek to revive it through a government bankruptcy process. According to a statement released by Alianza Summa, comprising Avianca , ACES and SAM airlines, Avianca will initially cover the routes operated by ACES, honoring the tickets and miles accumulated by ACES passengers. "Evidently, the circumstances of the world aviation crisis were too serious," said Juan Emilio Posada, the president of Alianza Summa. "Although everything was done to remedy the effects, the reality of the situation overwhelmed us." Posada said Alianza would retain 33% of ACES' workforce, or 523 people. But 749 employees will be let go. Alianza Summa promised that the employees would be taken care of "under the conditions indicated by the law." According to El Tiempo, Colombia's most prominent newspaper, Colombia's Federation of Coffee Growers, or Fedecafe, which owned 50% of the airline, was unwilling to bail it out. Fedecafe is enduring its own economic hardships because of low coffee prices around the world. A release from Fedecafe and conglomerate Valores Bavaria , which owned the other half of ACES, said that it was impossible for the airline to take refuge in Colombia's "Law 550," or bankruptcy, proceedings because most of its debtors were in other countries. Pending the decision by shareholders meeting in Medellin today, the Colombian Civil Aviation Authority grounded the airline from flying Wednesday morning. ACES flies domestic and international routes, including to Miami and Fort Lauderdale, Fla., Santo Domingo, Dominican Republic, and Lima, Peru. Alianza Summa was created 18 months ago as a way of dealing with the financial problems due to world aviation troubles. Avianca has since filed for Chapter 11 bankruptcy protection in the U.S., an option unavailable to ACES. One source confirmed that Alianza Summa would continue flying "normally" regardless of ACES' dissolution as the partnership is in name only. Juan Camilo Restrepo, an ACES shareholder and member of Fedecafe, called investing in ACES a "bad negotiation," according to El Tiempo. "Looking back, it was hit hard by all the episodes from Sept. 11, the decline in air traffic, the increase in the cost of gas, a series of phenomenon," Restrepo said. Restrepo added that it was "absolutely impossible" for the coffee sector to invest "another single peso" in the failing airline. The airline was $30 million in debt, which severely impacted its ability to continue renting its fleet of Airbus320 jets. The same source, who requested anonymity, said they would now be returned to the company. In order to cut debt, ACES had already reduced its planes from 21 in May 2002 to five that operated until Tuesday. But that simply wasn't enough to save the airline from being dissolved. -By Rachel Van Dongen, Dow Jones Newswires; 571-600-1980; colombia@dowjones.com

08-20-2003, 08:44 PM	#3
Unicorn 1:400 Leasing Agent Join Date: Mar 2003 Posts: 1,122	Not just for the best, but overdue Avianca is flirting with going down the drain, and deservedly so. It has always been indifferently managed, and the current management team did not se any need to try and improve operational efficiency post 911. When things got difficult they demanded their lessors unilaterally reduce rentals on the aircraft they had leased in. Nothing about stepping the lease rentals back up later, or lease extensions to ensure that the lessors managed to make some money on the deals, it was "cough up or else". When the lessors who had aircraft with them said "what else?", Avianca filed for Chapter 11 bankruptcy, despite not being a US airline or owned by a US company. It claimed that as it had a minor subsiduary in the US, flew to the US and because most of its creditors were US based, then it could claim C11 protection. Several of their lessors are fighting this in court, and I damned well hope they win. This is jurisdiction shopping of the worst kind. If this manages to get past then every half-way dodgy airline will set up US "subsiduaries" so they can use the Chapter 11 rules to their advantage. I don't want to see a great old airline go under, but I also don't want to see lease companies go down due to airlines dodging their responsibilities Unicorn __________________ It is by will alone I set my mind in motion. It is by the juice of sapho that thoughts acquire speed, the lips acquire stains, the stains become a warning. It is by will alone I set my mind in motion. PS. Buzz paranoid and proud of it!

08-20-2003, 09:21 PM	#5
nutsXplanes Guest Posts: n/a	Avianca My insider/bookie in Bogota told me that the Avianca may close a very important office in one of the countries that flies to along with the route to that destination. It'd be very sad to see Avianca gone but it could be that some new investors would do what it was done to LanChile. LanChile was a carcass that was reshaped completely from the check in counter to the planes along with ways to be operated. Now it seems to be the strongest airliner in South-America. Regards!!!

08-21-2003, 09:57 AM	#6
dmbronner Senior Collector Join Date: May 2003 Location: Miami, Florida Posts: 338	ACES What really happened? As a Colombian I can say the following: Aces was finished because the "Alianza Summa" was designed to dissapear this Airline. Before the integration with Avianca and Sam (Alianza Summa), Aces had a leadership in customer service, contrary to Avianca, who has a bad reputation for that. The problem was that Avianca has been a monopoly for more than 80 years, and with this integration with Aces, the bigger fish eaten the smaller. Now Avianca will continue with its monopolistic practices of bad service and higher fares.

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08-20-2003, 07:06 PM	#2
Eddy Two Guest Posts: n/a	Of course, it's always a shame to see a good airline go down the pan, but it would appear that on this occasion it was for the best. The loss-making operation by ACES was no doubt having a knock-on effect for SAM and Avianca and the board at Alianza obviously realised that the closure/liquidation of ACES would have a beneficial result for the other two airlines. Better act now before all three airlines went down the pan.

08-20-2003, 08:56 PM	#4
jarochopilot Guest Posts: n/a	How about making a model of the airline now that it is gone??

08-21-2003, 01:15 PM	#7
justin Insane Collector Join Date: Feb 2000 Posts: 2,005	The practice of shopping around the worlds legal systems is a menace, not just the US chapter 11 laws but law suits trying to maximise damage awards often try and bring cases in US courts on the most tenuous grounds or the Belgian war crime laws and many other examples I'm sure, Justin