Bloomberg News

Avianca Slows Growth Pace as Global Outlook Dims, Villegas Says

July 19, 2012

Avianca Taca Holding SA (PFAVTA), the owner of Colombia’s biggest airline, is slowing its expansion this year as a precaution as global growth falters, company President Fabio Villegas said.

Avianca Taca will expand available seat kilometers, a measure of passenger capacity, 14 percent this year, after about 18 percent growth in 2011, Villegas said in an interview in his Bogota office yesterday.

“We are being a bit more conservative in the face of market volatility,” Villegas said. “We are not feeling it yet, but we are anticipating impacts that could happen.”

Avianca Taca shares have gained 23 percent this year, the second-best performer in Colombia’s IGBC index, as passenger numbers rose 14 percent in the first five months of 2012 from the same period in 2011. In April, the company also paid its first dividend since the stock started trading in May 2011.

The company expects “good” second-quarter results even though crude prices were above $100 a barrel for much of the quarter and the Colombian economy slowed, Villegas said.

Colombia’s gross domestic product expanded 4.7 percent in the first quarter from a year earlier, its slowest pace since 2010. Retail sales fell 2.8 percent in April from a year earlier, the first year-on-year decline since September 2009.

Revenue Diversification

The company hopes to diversify its sources of revenue and take advantage of Colombia’s free-trade agreement with the U.S., which took effect in May, by boosting its cargo capacity with the four Airbus A330-200 freighter planes it ordered last year, Villegas said.

The company could make acquisitions in Latin America in the next two to three years, Villegas said.

“This is an option that you can never rule out, but to be big just for the sake of being big isn’t sufficient in this business,” Villegas said. “Size and profitability aren’t proportional.”

While Avianca Taca may sell American depository receipts “down the road,” there is no immediate plan to do so, Villegas said.

Brazilian investor German Efromovich paid $64 million to buy control of Avianca from the late billionaire Julio Mario Santo Domingo and save it from bankruptcy in 2004. He then created a joint venture with San Salvador-based Taca and brought on Villegas, a former interior minister who helped lead the U.S.-backed manhunt for drug lord Pablo Escobar in the 1990s.

To contact the reporter on this story: Matthew Bristow in Bogota at mbristow5@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus