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Venezuela's flag carrier VIASA collapses post-privatization amid financial woes

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Venezuela's flag carrier VIASA collapses post-privatization amid financial woes
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VIASA McDonnell Douglas DC-10-30 | Wikipedia

Venezuela's flag carrier VIASA, officially known as Venezolana Internacional de Aviacion Sociedad Cononima, ceased operations in 1997 following a failed privatization effort. Initially founded in 1960 as a private entity, the airline was nationalized in 1975 due to financial struggles. In 1991, the Venezuelan government opted to reprivatize VIASA, with Spanish carrier Iberia acquiring the largest stake.

The privatization process began when the government decided to sell off VIASA, transferring 60% of shares to private investors and 20% to employees while retaining some control. Iberia won the bidding with a $145.5 million offer, partnering with Banco Provincial and Northwest Airlines.

Despite initial hopes for success under new management, VIASA faced financial difficulties by the mid-1990s. Operations halted on January 23rd, 1997 after staff rejected restructuring plans proposed by Iberia. Attempts by various parties to rescue the airline failed, leading Iberia to liquidate it.

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One lesson from VIASA's experience is that selling a state-owned airline to a foreign company can be problematic if local market conditions require government support for profitability. "When these kinds of market conditions exist," it is crucial to recognize air service as "a public good," not merely a private enterprise.

VIASA's case highlights issues inherent in airline privatization. Unlike state-owned entities that can receive public funds during financial crises, private airlines rely on investor willingness to provide capital—a factor that ultimately led to VIASA's liquidation when investors deemed it financially unviable.

Organizations Included in this History
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