Robert Novells’ Third Dimension Blog

November 15, 2013

Good Morning and welcome back to the 3DB. Over the past month or so we have talked a lot about Pan Am and their beginnings. We have talked before about Pan Am being the airline chosen by the US Government to represent, protect, it’s interest internationally. This was especially true in Central and South America because the US needed to create a blocking force in South America to stop German expansion. The Panama Canal had to be protected and Colombia was a key piece in the puzzle.So how does the US control all of the moving pieces of the puzzle and protect the canal? They start an airline to meet the Germans head on and then they focus on making Colombia a strategic partner in their quest to protect the canal.

There is an interesting fact that needs to be revealed at this point. The US was a major player in helping Panama break away from Colombia in 1903 and now they want Colombia to help them protect Panama. Difficult position for both sides but they made it work.

Now, let’s talk about the airline that preceded Avianca………………………………

SCADTA

The Germans with the help of an Austrian, named Von Bauer, formed the airline Sociedad Colombo-Alemana De Transportes Aereos (Air Transport Society of Colombia-Germany), SCADTA, in September of 1919. This was the spearhead, of the German airline penetration into South America.

SCADTA began scheduled service on September 19, 1921 between Barranquilla and Girardot. The continent of South America finally had a reliable airline and most historians agree that this is probably the most significant date in Latin American civil aviation; in addition, shortly after scheduled service began, SCADTA created a company to handle aerial photography, made possible by cameras smuggled from Germany, and one of this unit’s first project was to provide reconnaissance concerning a border dispute between Colombia and Venezuela near Cucuta.

SCADTA continued to grow and in 1925 they bought two twin-engined Dornier flying boats  and began exploring opportunities for routes in the Caribbean. U.S. politicians blocked access to Miami and New York, ostensibly to prevent German interests from gaining a foothold in U.S. trade, but also likely due to the fact that the United States had yet to field an international airline of its own. One of the planes was shipped back to Germany and the other crashed the next year. SCADTA then looked south to start its first international passenger and airmail service, to Guayaquil, Ecuador, beginning in June 1928. This was extended to Panama City and Cristóbal in April the next year, tripling the airline’s route mileage. During this time, SCADTA began using the name Servicio Bolivariano de Transportes Aéreos in its marketing, referring to the great liberator of South America Simón Bolívar.

On February 23, 1929 the United States signed a bilateral air agreement, its first ever, with Colombia. Panagra, a partnership of Pan American Airways and the W.R. Grace shipping line, had started its own service from Miami to Panama City on February 3 with Charles Lindbergh piloting the inaugural flight in a Sikorsky S-38 flying boat. Panagra had stronger finances, more influence, and better equipment than SCADTA. Von Bauer signed a secret agreement with Pan Am president Juan Trippe in which SCADTA surrendered its international routes in exchange for an infusion of capital. Pan Am acquired 84.4 percent of the capital after a formal agreement was signed in February 1930 and SCADTA essentially became the Colombian part of the Pan Am network. Von Bauer resigned as president, and two U.S. citizens were added to the SCADTA board. In addition, new American and British made planes began appearing in SCADTA’s diverse fleet.

Although Von Bauer, alarmed at developments in Nazi Germany, had returned from retirement in Austria to lead the airline once again, the U.S. state department was pressuring Pan Am and the Colombian government to curb the German influence at the airline. On June 8, 1940 all 80 German employees were fired and the company was officially renamed Aerov&iacute Nacionales de Colombia– “Avianca” –on June 14. Pan Am’s shareholding was reduced to 64 percent from 80 percent, and the Colombian government held 15 percent.

Interesting beginning for the world’s oldest airline but now let’s talk Avianca……………….

Avianca

By the late 1940s the fleet had been updated with Douglas DC-3s, and most of the seaplane bases had been closed. Avianca resumed international services with a route to Ecuador launched on March 21, 1946, and service soon was added to the Panama Canal Zone. The next year a new Douglas DC-4 was connecting Colombia nonstop with Miami, and Avianca became only the second airline, after Aerovias Brasil, to connect with the U.S. mainland; however, the carrier remained part of the Pan Am system.

Avianca’s network reached to New York in April 1949; Lisbon, Rome, and Paris were added the next year. By 1957 Avianca had leveraged its strategic location with a number of new routes to the north and south and had upgraded its international service with the Lockheed Super Constellation, its new flagship.

A number of independent operators had sprung up in Colombia to capitalize on the availability of war surplus aircraft. Most faltered within a few years; Avianca absorbed two of them, “Sociedad Aérea de Tolima” (SAETA) and “Líneas Aéreas Nacionales, S.A.” (LANSA), in the early 1950s. The LANSA merger in 1951 reduced Pan Am’s shareholding to less than 40 percent. In 1963, Avianca bought the failed “Sociedad Aeronáutica de Medellín, S.A.” (SAM), founded by a retired U.S. Air Force captain, through its Aerotaxi subsidiary. Another generation of airlines started in the mid-1950s, including “Lloyd Aéreo Colombiano” (LAC), “Taxi Aéreo de Santander” (TAXADER), “Líneas Aéreas La Urraca,” and “Aerov&iacute Condor de Colombia, Ltda” (Aerocondor). Of these, Aerocondor proved the most effective competitor and mishap-laden Urraca survived until 1979. The Colombian Air Force also operated an air service to remote provinces known as the “Servicio Aeronavegación a Territorios Nacionales”(SATENA).

Avianca began flying to New York by jet in October 1960 via a leased Boeing 707. By 1962 it operated Boeing 720 jets on all its international routes, and began flying the three-engined Boeing 727 on domestic routes in January 1966. A couple of years later, Pan Am’s shareholding was reduced to 25 percent; it fell to 11 percent by 1975 as Avianca regained its independence, as displayed in a bold brick red color scheme adopted in 1970.

International services were expanded in the 1970s and the airline began operating Boeing 747 jumbo jets in December 1976. Bogotá-Frankfurt became the most important route. A number of air taxi services and tiny airlines sprang up in the 1960s and 1970s, but Avianca remained the dominant carrier by far.

Avianca’s influence waned in the 1980s, however. The company ran up debts reaching US$170 million in 1986, when its terms were renegotiated. As Air Transport World reported, Avianca’s public image at home deteriorated as its on-time performance fell from 66 percent in 1986 to 32 percent in 1988. The carrier was tremendously overstaffed at 11,000 employees and suffered poor labor relations. SAM, which concentrated on tourist traffic to resorts, maintained a good reputation, unlike its sister airline.

To improve the bottom line, Avianca sold off its massive Boeing 747s and began ordering 767s in 1988 to renew its fleet. It also began to update its computer reservation system, contracting with IBM and acquiring Maxipars CRS from British Airways. The number of employees was reduced to 5,000 by 1990.

U.S. efforts against drug smuggling in the 1980s eventually prompted Avianca to retreat from the Colombia-U.S. cargo market. Penalties totaled US$14 million by 1988; 450 kilos of drugs had been found aboard the company’s planes the previous year. Avianca subsequently invested a huge amount of resources in drug detection. Although it was privately owned, terrorists targeted the carrier after a government crackdown on drug dealers, downing a Boeing 727 in 1989.

Spurred by customer complaints, the Colombian government deregulated the country’s civil aviation industry in 1991, opening the skies to 25 foreign airlines and a number of domestic start-ups. Local competitors Aces and Intercontinental hit Avianca hard. Aces even won the right to fly the Bogotá-Miami route, also eyed by United Airlines and Iberia. Mexicana, Alitalia, KLM, and British Airways also were flying to Bogotá by then. Avianca was again allowed to carry cargo to the United States aboard its Boeing 767s; however, it faced competition from ARCA, Aerosucre, and Aces (Aerolineas Centrales de Colombia) and U.S.-based Challenge and Arrow Air on the freight side.

Alvaro Jamarillo Buitagro became CEO in December 1991. He sought to instill a ‘corporate mystique’ centering on customer service. The company launched a major restructuring in 1994, taking aim at productivity problems and reducing management levels from 13 to five. Catering and ground handling were outsourced. Avianca gained management control over SAM and the helicopter service Helicol in 1994. Its major stockholder was Grupo Empresarial Bavaria, the massive Colombian conglomerate.

Today, Avianca is part of the Star Alliance along with its merger counterpart TACA. Although I have always referred to Avianca as the world’s second oldest operating airline the fact that I want you to remember today is that Avianca is the oldest operating airline in the western hemisphere. So, as Paul Harvey would say, “Now you know the rest of the story.”

Have a good weekend/week, enjoy time with friends and family, and remember what President Truman said – “There is nothing new in the world except the history you do not know.” Gatekeepers know this.

Robert Novell

November 13, 2013