The airline Lloyd Aéreo Boliviano, LAB, is ready to fly

After five years of financial and logistical restructuring, the “National Flag Carrier of Bolivia”, LAB, is ready to fly again. It only awaits the final “yes” from the General Directorate of Civil Aviation (DGAC) to commence flying national and international routes.

Lloyd Aéreo Boliviano (LAB), the emblematic flag carrier of Bolivia, is rising like a phoenix. Under the premise that "it never went bankrupt", after five years of silent work by the general management, supported by the Federation of Workers and a Bolivian investor, now the airline’s executives are only waiting for the go-ahead from the General Directorate of Civil Aeronautics (DGAC) to start its operations immediately.

"Since May 2017, we have been held up in the process of recertification as required by the DGAC. It an incomprehensible delay", says Orlando Nogales Nogales, general manager of the LAB. The DGA must "re-establish" the Air Operator Certificate (COA) and the operating permit.

Speaking at the airline’s headquarters in Cochabamba, Nogales confirmed that the company already has three aircraft, including a Boeing 727-200 (designation CP-1366) with capacity for 164 passengers, which will be ready to commence flying as from April 2018.

Currently, the aircraft is located in LAB’s hanger where it is being maintained by SAE Company (Specialized Aeronautical Services).

"If the DGAC continues to delay, we are thinking of renting. This airline must fly, yes or yes”, said Nogales, emphasizing various technical parameters and aviation regulations.

It has been a journey of five years. According to the general management of LAB, they have been "ready to fly" since 2012. With the support of the new Trade Union Federation of Workers, that journey includes company "research", the recovery of missing documentation, ownership rights to tangible assets such as land, infrastructure, technology and all the logistics that LAB had created over the past 90 years of its history.

Convinced that LAB "is not bankrupt", in April 2012 the workers managed to put the company in order, and restructured it including its registration with Fundempresa (commercial registration authority) using a team of legal professionals, so as to be protected by Article 54 of the New Political Constitution of the Plurinational State of Bolivia.

"It is with thanks to the experience and intelligence of Mr. Nogales, who has been working constantly at the company's reconstruction, that we have reached this moment”, said Narda Geanine Cáceres Jiménez, executive secretary of the Federation of Workers of LAB, which represents 168 workers awaiting the relaunch of the company.

The business case for the strength of LAB is based, not only on its long history, but also on historical assets worth more than 650 million Dollars.
As part of that heritage, Nogales, after a five years investigation, proved that LAB has ownership rights to the land of 28 airports in the country.

"According to the document signed in 1951 with the State, 27 airports in the country are recognized as the benefit and property of LAB, but not the aerodrome, meaning the runways”, he said.

With that document in hand, the general manager said LAB has the documentation and registration of the ownership of the “Royal Rights” of main airports such as El Trompillo airport (Santa Cruz), Jorge Wilstermann (Cochabamba) and Oruro airport. In total, there are 296 hectares correctly defined in favour of LAB.

"Having ownership of all these lands, if we sold just one piece of land we could pay off all the company’s debts. Of course, the State must ratify our actions. But that is why we are going to fly again”, said Nogales.

Capital and Alliance

Another favourable aspect to the reconstitution of LAB, was the injection of investment capital by a private entrepreneur in 2012. In addition, there is the strategic alliance between LAB and SAE, working to deliver the highest maintenance standards for the three aircraft. The airline’s first objective is to start operating in the domestic market. Then to reinstate the original 26 international destinations such as North America (4), Central America (9), South America (10), Europe (3).

A Journey in the Face of Disbelief

For Narda Geanine Cáceres Jiménez, Executive Secretary of the Union Federation of Workers of Lloyd Aéreo Boliviano (LAB), it has been a difficult challenge to reenergise a non-functional national airline when the rest of the country was totally unsupportive.

"I worked in the reservations part and the commercial part. I was elected as general secretary and then as executive secretary. It has been a difficult few years”, she said.

Currently, the Workers' Federation has 50% ownership of the airline. The other half is owned by the private Bolivian entrepreneur who is still supplying fresh working capital on a day-to-day basis. “In the past there were some bad people but today we have some very good people, including this Bolivian businessman”, she said.

Between Lights and Shadows

Originally, Lloyd Aéreo Boliviano started activities on September 14, 1925. Its operational base was, and still is, the city of Cochabamba. During the Chaco War between Bolivia and Paraguay, the airline was designated a “Righteous Organisation”. As part of the Bolivian Air Force, its aircraft defended the nation’s oilfields. The airline is 93 years old and is one of the oldest companies in South America.

Capitalization

During the government of Gonzalo Sánchez de Lozada, the Capitalization Law was promulgated in 1994, which sold LAB to the Brazilian VASP airline on October 19, 1995. The sale meant that 50% of the package was priced at a 90% discount to LAB’s true value.

In 1996, LAB, then valued at $ 60 million was transferred to VASP, without respecting the process determined by the Capitalization Law, which specified the absorption of 100% of the liabilities by the General Treasury of the Nation. This was a detriment to the State of more than US $ 350 million. It was an irregular and fraudulent operation to the benefit of the Brazilian businessman Wagner Canhedo.

Transfer

In 2001, VASP sold its ownership of LAB to two Bolivian investors, Raúl Garáfulic and Ernesto Asbún. Asbún took over the management of the company, neglected to pay any taxes, contributions to social security or AFP, thereby increasing its debts "astronomically" without any explanations, much less any professional audits.

Inflection

In 2007, the DGAC decided to halt the airline’s operations, which, from January 2007, meant the suspension of flights to Spain, Panama, Mexico, the USA, and other destinations until the company finally collapsed due to lack of liquidity, which affected thousands of passengers.

After Asbún abandoned the airline, management was de facto in the hands of the Federation of Workers of LAB. Today, ownership has been transferred into private hands, with the assistance of the new investor.

Points of view

“If LAB returns it will be a very serious competitor” said Constantino Klaric, aviation expert.

"Actually LAB has never been bankrupt. Their assets are large, they have properties, the airports belong to them, they have all the infrastructure, they have hangars, where they make repairs not only to Bolivian but also to Chilean airplanes. It is a company with logistics and equipment like no other airline in the country”.

“LAB has a long history not only at a national level, but throughout Latin America. It is the fourth oldest company in the world and the most prestigious at one time. That shows that it is not dead, it exists and it is still valid. Now if it were to fly, it would be another competitor in the market, a very serious and big competitor in Latin America, which for any Bolivian would be a proud moment, given that it was our flagship airline”.

“I have been manager of LAB’s engine workshop for 25 years. Currently Charly Papa (CP) 1366 is ready to fly. I am proud to work here”, said Freddy Mendoza, engine workshop manager.

“I work in the aircraft dispatch division. It is a very encouraging that LAB will fly again. We work with pride”, said Remberto Soto, aeronautical technician.

“I've been working here for 30 years. Our job is aircraft maintenance. We have experienced quite difficult times; now we hope to fly again”, said Vicente Flores, aeronautical technician.