Air Transport World

The mouse and the elephant. (Costa Rican airline Lacsa and U.S. competitors for Miami route)

Costa Rica and its flag airline, Lacsa, feel the pinch of a bilateral that permits 6 U.S. competitors on the prized Miami route. By Joan M. Feldman.

San Jose, Costa Rica-The U.S. didn't call out the Marines when Costa Rica recently challenged American Airlines' entry into the Miami-San Jose market. But before the dispute was finished, several important people, reportedly including the U.S. Secretary of State and National Security Adviser, had become involved. The U.S. had taken steps to reduce the Costa Rican national airline's route access. So tiny Costa Rica-population 2.8 million-backed down. Humongous American started service. The Central American country had found out, again, what a liberal bilateral is supposed to mean.

Costa Rica did not even have an aviation bilateral with the U.S. prior to 1979. Air services between the two were based on the traditional trading principles of comity and reciprocity. Lineas Aereas Costarricenses SA (Lacsa), the flag airline, held a nonstop monopoly. Pan Am was the sole U.S. airline in the market but Costa Rica only allowed it to operate via an intermediate point. Despite the monopoly, Lacsa was a perpetual money loser.

Then Pan Am moved its Central American hub from Guatemala to Miami, leaving a gap in the market. There was a 900% devaluation of Costa Rica's currency, which resulted in a drop in traffic but an even-bigger drop in costs. These events gave Lacsa some confidence. So in 1979, it supported a bilateral agreement that included double disapproval of fares, unrestricted capacity, unrestricted right of designation and wide-open charters. it was exactly the kind of bilateral, the so-called Belgian model, that the U.S.' bigger aviation partners were refusing to accept but smaller countries such as the Netherlands, Israel and Jamaica were signing in exchange for new U.S. routes that they could not hope to obtain otherwise. Says Paulo Manso, Lacsa's commercial planning manager, "We had to play the game."

Rodolfo Mendds Mata was Minister of Transportation at the time. His party recently won the national election and Mendis again will hold high position, perhaps chief of staff to the new President, Rafael Calderon Fournier. "We had to sign a liberal bilateral with the U.S.," he recalls. "It was that or none at all."

Mendes had several reasons for wanting the agreement. He regarded Lacsa's monopoly as "an obstacle to tourism," he told ATW. Costa Rica has been trying to reduce its dependence on agriculture, particularly coffee, for many years. Also, he "thought Lacsa had to fly to new places [in the U.S.] to pay for its new equipment-it was replacing BAC-111s with Boeing 727s." Looking back, he still feels that he did the right thing. "For the first 1 0 years, the bilateral has been good for Costa Rica. …

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