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The day 19 May 2020 Ecuadorian aviation changed forever after the announcement by the President of Ecuador, indeed, by Executive Decree 1061 it was arranged the Liquidation of the Public Company TAME Línea Aérea del Ecuador “TAME EP”.
The document indicates the deadlines for, First of all, carry out actions to have the largest amount of assets to cover the payment of their debts expeditiously and in accordance with the legal priority. Subsequently enter into a liquidation process of up to 210 days and finally transfer remnants of its assets to the Ministry of Transport and Public Works.
This liquidation occurs in the midst of the impact of the COVID-19 virus pandemic, which ended up aggravating the situation and giving the final blow to the airline that was carrying close to 58 years of history. Nevertheless, the decision taken responds to a scenario that was presumed probable for some years now. It is known that the airline accumulated operational losses year after year from the 2012 until it reaches more than USD 300 millions. These aspects, added to the delicate economic situation of Ecuador, led the National Government to the decision not to continue its support for its airline and to justify with its liquidation part of the needs for tax cuts during the health emergency. Unfortunately, there is more of 900 Affected workers who will stop providing their services to the airline.
With the liquidation announcement of TAME EP, Ecuadorian aviation faces a very hard blow, that goes beyond the sadness of seeing the last one close “flag carrier”. This concept that is increasingly disappearing in the industry, puts an end to an icon of aviation and Ecuadorian identity, who lived good and bad times, but what, since when he was born under the administration of the Ecuadorian Air Force, had the challenge of connecting to every corner of Ecuador.
There are several factors that can explain the arrival of TAME EP to this outcome. An excessive international expansion without further market studies, probably neglecting its strength in the local market, marketing failures, growth of a heterogeneous fleet (until 17 ships compared to 5 assets in liquidation[1]) with the complications of maintenance and pilot training, and an important wage bill for nearly 1600 people at their peak in the 2015, coverage of local routes in airports without increased demand, among others that could be evaluated in more detail..
From this moment, Ecuadorian aviation lives a new reality, A competitor that held second place in market share is not going to fly again, is it?? and the cake is distributed for the 3 private airlines: LATAM Ecuador, Avianca Ecuador and Aeroregional, but in the face of a highly difficult scenario generated by COVID-19.
Indeed, The pandemic has put the entire aviation and tourism industry at a global level in check with the largest known historical crisis and the airlines that operate in Ecuador are not oblivious to this situation. The future is still uncertain with a gradual reactivation started on 1 last june, of these scheduled airlines.
Prior to this crisis, both Avianca and LATAM had interesting growth plans in the national domestic market, where the first intended to fly to Nueva Loja and the second to Coca, Loja and Santa Rosa, all these plans have been waiting for a better and more encouraging outlook, that without a doubt and as IATA itself says, could take a few years.
The effects of this pandemic on the Ecuadorian aviation sector have not yet been quantified, but the reduction in air passenger traffic in the country would have fallen by more than 98% from the 17 march 2020, day regular operations were suspended, and although airlines such as Aeroregional have been able to maintain certain income by carrying out international repatriation flights under charter modality, just like LATAM, the outlook after the opening of regular operations since the 1 June 2020, tests the efficiency and creativity of airlines to maintain their operation in the country in a profitable manner, but above all, long term sustainable, even more taking into account the time that this recovery could take.
Since the beginning of June, little by little the air sector was reactivated, with less frequency than we were used to and occupations of the 30% or fewer passengers on some flights, but it is important to give a start signal and that the market receives that stimulus and confidence so that passengers return to the airports, planes take off again and the economy picks up again, Aviation being essential to meet this objective.
not the best view, but in the face of a crisis there is always an opportunity and even more so when an airline that had a strong presence in the market for years leaves this, opening the doors for current operators to become stronger or for a new competitor to, like a low cost, explore the still undeveloped air market of Ecuador with a new concept of flying, to which we are accustomed until now.
[1] The fleet of TAME EP until the day of the liquidation announcement was made up of an Airbus A319 (HC-CGT inactivo), an Airbus A320 (HC-CPB) and three ATR42-500 (HC-CLT, HC-CMH y HC-CMB), these last turboprop aircraft are part of the airline's assets, along with two Embraer 190 which had been withdrawn from the active fleet in December 2019.
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The politicization of a public company is the cause of disasters (in Ecuador) cheap, they dislocated him with the excessive income of personnel.
I would like the names of the administrators responsible for the TAME debacle to be mentioned in the comments, well until the 2012 date on which we were fired more than 200 employees, the Company was still sustainable, but nevertheless on those dates nobody said anything, bye and nothing else. In the comments the situation is generalized, facts that we all know and it is not possible to point out the true culprits with their first and last names, those of the leadership of the company, managers and others who used in their time,
Tame EP is created in May of 2011 and starts flying abroad two years later, in June of 2013, which coincided with the change to the new Quito airport in February of the same year. Since that year, the destiny of Tame EP has been compromised by venturing into the international market without being part of an airline alliance., without a connection HUB suitable for the needs of the market, which led him to have a very low profitability compared to the investment made in all routes, which, added to the expenses for the lease of aircraft and their respective operating and maintenance costs, left it totally financially weakened to be able to meet its current and short-term obligations., taking it to its liquidation. I think it is unnecessary to indicate names, since the damage occurred from the beginning of Tame EP due to bad decisions from its board of directors made up of people who obeyed a political project that in no way conformed to how an air transport company should be managed.
Just as its bankruptcy occurred with other Ecuadorian airlines such as Ecuatoriana, SAN, SAETA or others, even if they are similar or similar circumstances such as that of TAME, there will be other airlines that take the routes or expand like LATAM, Avianca, Aeroregional o AAndes. I am sure that it will recover in the national market, Personally, I would have liked TAME to be recast and save the brand ??
As you should know, Avianca and LATAM have filed for bankruptcy, taking advantage of the chapter 11 of American legislation, which allows them to temporarily suspend their debt payments and their restructuring. This situation has led them to stop serving some routes in addition to suspending their aircraft orders and with it the dismissal of personnel, as is the case of LATAM, which closed operations in Argentina indefinitely with losses of more than 280 million dollars in the last two years. Let's hope that your operation in Ecuador will continue, since otherwise the offer of flights would be greatly affected.
Completely agree my dear Pablito a little bit of all excess staff mismanagement and political interference led to the current situation of tame
Dear Nicholas, It is also necessary to note the excessive indebtedness in aircraft leasing to meet the opening of international routes and the lack of studies of returns on investment in those routes.. Consequently, the return values on the routes were less than the money invested, which, together with the COVID-19 pandemic, led it to an unsustainable situation on the part of the Government, decreeing its liquidation.
There are two edges to the collapse of Tame EP. The first lies in the lack of planning and control of their finances, the opening of unnecessary international and domestic routes and their high administrative costs due to excess personnel and, the second for political interference in the company, which left her at the mercy of the competition, much better prepared and efficient to take over the Domestic market in which Tame EP lost prominence and participation for almost a decade when it changed its Vision and its Mission for which it was created.