Government decision to liquidate Tame airlines could leave some airports without service

This morning’s announcement by President Lenin Moreno that the government will liquidate the assets of publicly owned Tame airlines came as a shock to the management of several airports, including those in Cuenca and Manta.

A Tame airline jet on the tarmac in Quito.

Although Tame has been heavily subsidized for decades, it has been the backbone of the national air service in recent years, particularly for mid-sized cities such as Cuenca, Manta and Loja.

The decision comes a week after Colombia-based Avianca filed for bankruptcy and Chile-based Latam announced it was facing a “financial melt-down.” Latam was Ecuador’s second-leading air carrier, after Tame, before the Covid-19 virus shut down aviation traffic while Avianca was in discussions with Ecuador civil aviation authorities about expanding its national service.

Although Latam management says it hopes to return to Ecuador following the lockdown, it will concentrate in the Chile, Argentina, Brazil and Peru markets.

Although Moreno said that the government would continue to provide government flights to small communities that depend on Tame, aviation experts are skeptical. “I don’t think that’s a promise the government can keep given its precarious financial situation,” says Santiago, Chile aviation industry consultant Walter Sanchez. “It’s possible that cities like Manta and Cuenca could be without passenger service for several months after the the coronavirus restrictions are lifted. “Quito and Guayaquil will also suffer but I can’t imagine there won’t be some flights between them.”

Sanchez added that it’s too early to tell what air travel will look like in Ecuador and Latin America when commercial flights resumes. “At the moment, no one knows what the future holds. Even in previously strong markets like Europe and the United States, there are fears that air service after the virus will leave some airports under-served or unserved altogether.”

Moreno’s announcement that Tame would close is part of a $4 billion cost-saving plan the president says is required to counter the economic impact of Covid-19 and the dramatic drop in oil prices. Among other budget-tightening measures are the closure of the national postal service and the government-run railroad system, a reduction of working hours and pay for government employees, the layoff of hundreds of contract workers and the consolidation and elimination of 40 government ministries and offices.

In addition, ambassadors to Iran, Nicaragua, Malaysia and the Andean Parliament will be recalled, leaving those diplomatic missions in the hands of lower-ranking officials.

Although the Tame loses are difficult to compute due to bookkeeping irregularities, estimates range from $500 million to a billion dollars since 2014.