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May 8, 2012 12:22 am
A Bolivian-born, Brazilian businessman might seem an unlikely person to own one of Colombia’s trademark companies, but German Efromovich is not one to worry about such things.
Mr Efromovich, who has a background in oil and telecommunications, bought Avianca, Colombia’s national airline, for $64m plus the assumption of $220m in debt and leasing liabilities in 2004.
Avianca was then in Chapter 11 administration, but he was betting that the company’s proud history – it claims to be the world’s second-oldest airline – would help him turn it round. It worked. “The demand is there – people love this airline in the country,” Mr Efromovich says.
Avianca hit trouble in the early 2000s after a series of regional crises undermined commodity prices and Latin American currencies. The airline was then owned by Valorem, a holding company controlled by the family of Julio Mario Santo Domingo, the late billionaire Colombian businessman. Valorem was bleeding money and half of its debt belonged to Avianca, so it decided to put the airline into Chapter 11.
“I went to Colombia and somebody said: ‘Why don’t you buy Avianca, nobody wants it’,” says Mr Eframovich. He jokes that, to stop people asking him to buy the airline, he made an offer he thought the creditors would refuse. To his surprise, they accepted it.
By 2005, he had doubled the fleet to 70 aircraft and the same year received citizenship from Colombia’s then president, Álvaro Uribe, for his investment in the airline industry and in oil.
Today, the airline has a fleet of more than 100 larger aircraft. The holding company, Avianca-Taca, made a profit last year of 202bn pesos ($114m), up 221 per cent on the previous year.
It also has operations in Brazil, Peru and Ecuador. Its Brazil division is planning to buy 50 aircraft for use in Latin America’s largest economy at a reported cost of $4.1bn.
There has been some turbulence along the way. Avianca-Taca listed on the Bogotá stock market a year ago, raising $260m.
But its shares suffered when investors turned bearish on the overall market and an arbitration claim from former owner Valorem weighed on the stock.
Helped by Latin America’s strong economies, the airline is expanding. It transported nearly 21m passengers in 2011, 18 per cent up on 2010.
With a free-trade agreement between the US and Colombia due to take effect this year, Bogotá’s El Dorado airport is doubling its cargo capacity. Avianca is matching it, beefing up its cargo operations through the purchase of four Airbus SAS freighters last year.
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