How is the company performing?
If you look at the number"”and you can because we are a publicly listed company"”we are doing very well. We are pleased with our results. At the end of 2013, Avianca Holdings S.A. recorded a revenue growth of 8% from $4.2 billion in 2012 to $4.6 billion in 2013. Operating costs increased 5.9%, from $3.9 billion in 2012 to $4.2 billion in 2013. Overall, adjusted net income for 2013 amounted to $234.1 million, which is 132.5% above the adjusted net income for 2012, which stood at $100.7 million.
But they are not a surprise given that we have been growing for more than 10 years. And there are some good, strong plans for the future. A fleet renewal program is ongoing, for example, and the average age of the fleet now is just 4"“5 years old. It gives us many more opportunities. From Latin America, we are extending our plans to Europe. We will serve London from July 2014.
Tell us about the merger with TACA. Was the transition easy to implement?
Avianca Holdings S.A. registered synergies in income amounting to $219 million. The merger went very smoothly and it has affected us in a very positive way. It gave us more muscle, instant growth, and all the usual synergies that one would expect from a merger.
One interesting thing to note is that the two airlines had almost no overlap in the routes they served. I think there were just two services we were competing on and even then they weren"™t close to the same timings. So it was just like adding frequencies.
In effect, a whole new network was added for both airlines. That"™s a real win-win situation.
There were plenty of other positives too. People always talk about Latin America as a single region, which doesn"™t tell the whole story. Each country is quite different culturally. This merger allows the airlines to expose themselves to these differences, which is a good thing for business. It helps us to understand the market.
We also had to convert the frequent flyer programs and we even changed the entire IT infrastructure. That was a big project but the fact that we have done it successfully is a real plus for the airlines.
Overall, it was a lot of work and there was the odd small surprise. But in my experience, it couldn"™t have gone much better. It was an almost perfect merger. We have already gone public in Colombia and New York, which shows how robust the merger has already proven.
Will we see more mergers in the industry?
Definitely. I don"™t know who, where or how but it is the only logical way to go. This is a tough and complicated business. It is not like the old days when you could go out and easily acquire a plane and start an airline. Today, the sophistication of the business is such that it means a big investment.
Take the procedures for safety, for example. You need a comprehensive organization with skilled personnel to fulfil all the requirements. It isn"™t easy.
In other words, if you want to go into the aviation business today"”and succeed"”you need a lot of help. And you need a lot of muscle financially because you really want 30 or 40 aircraft to serve even a niche market properly.
Aviation is an industry that is getting more complex every day and consolidation is a way to meet this challenge.
You mentioned safety. What can be done to improve safety in the region?
Overall, the industry has done very well with safety. IATA and ICAO have played important roles in this regard. I would say that we have all the tools we need.
But there is still room to improve the safety culture within companies and certainly within this region. Safety has to be in the DNA of every person in an airline company.
Incidents occur just when people think it"™s safe. You cannot ignore the small things.
It is not enough to be 99.99% sure something isn"™t going to happen. You can"™t take any chances whatsoever. Only when people are prepared to make sure of that 0.01% will we have a perfect safety record.
How is the infrastructure in Colombia? Is it up to the job of facilitating your continued growth?
Infrastructure is not just a problem in Colombia. It is a problem throughout Latin America. Governments are not giving the necessary priority to infrastructure development. This is perhaps because airport projects are a major investment and you don"™t have an obvious or quick return.
In any case, Latin America does it differently to the rest of the world. The governments really only invest in infrastructure when they are forced to by an economic crisis.
They think this way for two reasons. First, they know that the crisis situation will turn round and that the investment does make sense. It is seen as a positive economic move. The second reason is because in moments of economic crisis the thinking is to get people jobs. Investment in infrastructure creates the opportunity to provide those jobs.
Nevertheless, we have to accept that there is an infrastructure crisis in Latin America. Of course, I"™m talking specifically about airports here but really it is infrastructure in general. The region needs to improve.
So will aviation in Latin America be able to continue its impressive growth rate of recent years?
It should do because Latin America is creating a new middle class, new consumer"”but there is still a long way to go. The potential demand is there and the governments will see that and respond.
Governments in Latin America are always looking to do more in improving equality and there is still a huge slice of the population that doesn"™t yet have access to aviation.
If we can unlock this potential, and assuming we can improve the infrastructure, then there is no reason why growth shouldn"™t continue.
Aside from infrastructure, what other challenges are there to growth?
There are many. Regulators with consumer rules that make no sense is an obvious one and I know IATA has been very quick to point out how prevalent these are.
And then there is airport concessions that inevitably mean a massive increase in airline charges. Because of the way these deals have been done there is a conflict between the government, the concessionaire, the airlines, and the consumer. That isn"™t right. These deals should benefit all parties and not put them into conflict with each other.
So there are many challenges and aviation in the region must overcome them all. I think we will.
How about the environment? Are you confident in the ICAO process for a global market-based measure?
ICAO is a very important body but ultimately can seek only consensus. It is not a regulator, it cannot enforce, and that is why we can have difficulty with these issues.
Europe has been proving this. It seems that they are really more concerned with revenue than with the environment.
Aviation is doing a great job in environmental mitigation, especially compared with other industries and we shouldn"™t be afraid to say that. We should also point out the hypocrisy in some circles that accept traffic jams in major cities and yet complain about an aircraft overhead that is transporting people far more efficiently.
As the industry celebrates 100 years of commercial flight, what do you look back on as the important milestones?
Actually, rather than individual events and improvements, I like to look at the big picture. How incredible is the change from 100 years ago to now? Think about that first flight and then compare that with the modern aircraft.
When you look at a Boeing 747 or an Airbus A380 taking off with…
