Collapse
Rumors that government officials flew their family members for free on Ecuatoriana hurt the airline's reputation. During the late 1980s, Ecuatoriana had also developed a reputation for being unreliable. Lengthy flight delays and cancellations were commonplace. Faced with these problems, as well as competition from other carriers such as the privately owned Ecuadorian carrier SAETA, American Airlines (which had assumed Eastern Air Lines' Latin America routes in 1990), and Continental Airlines, which began serving Ecuador from its Houston hub in 1991, Ecuatoriana ceased operations.
Affected by the general economic crisis in South America during the 1990s, Ecuatoriana encountered deep financial problems. The airline stopped flying at the end of September 1993. Some of its leased airplanes, two A310s leased directly from Airbus and its single DC-10 were taken back, with the latter stranded in Panama since Ecuatoriana was not able to meet the lease payments. Ecuatoriana was forced to rely on competitors TAME and SAETA to fly its North and South American routes, after a deal with Costa Rican LACSA broke down.[2] At the end of 1994, SAETA made a $31 million bid in an attempt to acquire Ecuatoriana, but this didn't go through.[3]
After a lengthy privatization process, with the participation of nine consortiums that included ACES, Air France, British Aerospace, Carnival Airlines, Challenge Air Cargo, Continental Airlines, Aerogal and TACA, the consortium led by Brazilian airline VASP (and local investor Juan Eljuri) won the bid through the Guayaquil and Quito stock exchanges, buying 50.1 percent in August 1995 (at $1500 per stock), with a five-year business plan and an effective injection of $10 million during the stock bidding. The government retained the remaining 49.9% and announced it would keep 25% of the remaining stocks (administered by TAME), with 24.9% to be sold within six months. The process was not exempt from political controversy, as the Comptroller, the Supreme Court and the Congress all questioned the process.[4]
With privatization complete, Ecuatoriana received some Boeing 727s, which were repainted in Miami and at Tucson International Airport in Tucson, Arizona. By 1996, short domestic and international services were restarted, with a livery that resembled VASP's. A single DC-10, also borrowed from VASP, allowed the airline to reintroduce services to Madrid's Barajas International Airport.
March 2000 saw the airline flying to Buenos Aires, Cancún, Guayaquil, Manaus, Mexico City, Panama City and Santiago using Airbus A310-300, Boeing 727-200 Advanced and McDonnell Douglas DC-10-30. That year, Ecuatoriana was caught up in the aftermath of the collapse of Ecuador's economy and once again found itself in financial trouble, and VASP decided to sell its part of the airline, with both Aero Continente and Lan Chile being bidders at that time.[5] Despite claims that Lan Chile was not interested in Ecuatoriana, the Chilean carrier was operating its own aircraft on behalf of Ecuatoriana on the lucrative routes to the US after Ecuatoriana's aircraft were repossessed by lessors in late 2000.[6] Following the rejection of Aero Continente's bid and the suspension of Ecuatoriana's air operator certificate, Ecuador's civil aviation authority cleared Lan Chile to start up a subsidiary named Lan Ecuador to fly many international routes previously operated by Ecuatoriana.[7][8]
Lan Chile owned 50 percent of the airline, wet-leasing two Boeing 767s to the company, but in 2004 sold its part to Lloyd Aéreo Boliviano. By early 2005 LAN had taken over Ecuatoriana's routes and fleet.
