By Gabriel Araujo and Andre Romani
SAO PAULO (Reuters) -Brazilian carrier Gol Linhas Aereas Inteligentes SA and Colombia’s Avianca said on Wednesday they were combining under the roof of a common holding company, signaling a move toward post-pandemic Latin American airline consolidation.
The holding company, called Abra Group, will be jointly controlled by the principal shareholders of Avianca and the majority shareholder of Gol, they said, adding that both airlines would continue to operate independently and maintain their respective brands.
They said other financial investors had committed to invest up to $350 million in Abra Group upon the closing of the deal, which is expected in the second half of 2022.
The move comes after Avianca completed a Chapter 11 bankruptcy reorganization last December and agreed in April to merge with Viva – another of Colombia’s most important commercial airlines – and would strike a sweeping regional alliance that could attract notice from competition regulators.
Abra, which has called itself a “pan-Latin American network of airlines,” will also own a non-controlling 100% economic interest in Viva’s operations in Colombia and Peru and a minority interest in Chile’s Sky Airline.
Brazil-traded shares in Gol were up 3.4% at 13.61 reais in morning trading, outperforming the broader Bovespa stock index, which rose 2%.
Analysts at Citi said the proposed combination implies a substantial upside for the sector in terms of potential pricing power.
They cautioned that antitrust considerations as well as Gol and Avianca’s separate partnerships with U.S.-based airlines could represent issues. American Airlines Group Inc holds a stake in Gol and in Chile’s JetSmart while Avianca is an United Airlines partner.
“Moving towards an eventual joint business agreement with a U.S. carrier, such as the one that Delta currently has with AeroMexico, a combined Gol-Avianca would not of course be able to have joint business agreements with both carriers,” the analysts said. “(But) even ignoring these alliance issues, a Gol-Avianca tie-up would likely entail significant antitrust considerations.”
Roberto Kriete, an Avianca board member and founder of Mexico’s Volaris, will serve as the group’s chairman, while Gol’s founder Constantino de Oliveira Junior will be its chief executive. Avianca’s CEO Adrian Neuhauser and Gol’s Chief Financial Officer Richard Lark will serve as co-presidents.
“This agreement places Abra’s airlines in a position to lead air travel within the region – serving a population of over 1 billion and GDP of nearly $3 trillion – providing significant opportunities for capacity and revenue growth,” Oliveira said.
Abra will focus on achieving synergies to ensure lower costs and expand routes, the firms said, without providing details.
Gol said in a separate filing that the transaction involved its controlling shareholder, investment fund MOBI FIA and certain shareholders of Avianca Holding including Kingsland International, Elliott International and South Lake One.
MOBI FIA will contribute its Gol shares to the newly formed company in exchange for common shares of Abra, Gol said, adding that the holding company was set to be a private limited company incorporated under the laws of England and Wales.
In Brazil, operations of Avianca’s local unit were suspended in 2019 after it filed for bankruptcy.
(Reporting by Gabriel Araujo and Andre Romani; Editing by Louise Heavens, Will Dunham and Edmund Blair)