Avianca-TACA's merger - new landscape in Latin America

[skyteamelite]

Avianca and TACA merged yesterday in AIRFRANCE-KLM style (both brands will be retained, but a new holding has been created merging the two airlines, which will be run under joint strategic management), to create the largest Latin American airline in terms of number of destinations (100), passengers (15.4 mil) and fleet size (129 aircraft), and joint first with LAN in terms of revenue. The airline will keep its current 4 hubs (BOG, LIM, SAL and SJO) for the time being.

Avianca has also recently overtaken the management of its Brazilian subsidiary (within the Synergy Group) OceanAir. The Synergy Group also owns small Ecuadorian carrier VIP, and there have been talks for several months now of it acquiring an 80% stake in Ecuadorian airline Aerogal (an MoU in this direction was already signed a couple of months back). No further steps have been taken toward the acquisition since then though (or so it seems).

CONTEXT: COPA's subsidiary Aerorépublica/P5 (in practice fully integrated into COPA and in OnePass) is leaving SkyTeam together with Continental on 24th Oct. Most likely, CM and P5 will follow CO in joining Star Alliance. There have always been doubts about CM and TA co-existing in Star Alliance as they are direct competitors in Central and South America. Now, it seems to me impossible that AV-TA and CM-P5 could co-exist in any alliance, as AV is the flagship carrier of Colombia and P5 is the 2nd largest carrier in the country (and, IMHO, by far the best).

It will be interesting to see what happens. I realise that any theory at the present time would be mere speculation... I do hope however that AV-TA will join SkyTeam, which will be missing Central and South American coverage once CM has left.

Of course, AV-TA will have to work on a joint frequent flyer programme to begin with... Hopefully more along the lines of CO/CM's OnePass or TA's Distancia, rather than the appalling Avianca Plus.

Any news, comments or information on the above would be much appreciated.

It would also be interesting to know what's happening with VIP and Aerogal in Ecuador.

AND how Varig/GOL moves towards SkyTeam membership. If it does eventually join SkyTeam, and OceanAir becomes integral part of AV-TA, would these two Brazilian carriers (Varig/GOL and OceanAir within AV) then be able to co-exist in the same alliance?

[Inti]

Yeah I got the e-mail. I fly Taca about 2-3 times a year. Not bad service, their programs point is kind of a pain to deal with, hence why I'm sticking with LAN for now for South America travel.

Avianca just recently started a code share agreement with Delta, so I can see the whole Pro- Sky Team move.

[skyteamelite]

Still no news/confirmation of COPA (CM+P5) joining Star Alliance...

[AdamSouthFL]

This is an interesting merger to me. I don't really understand Taca's hubs and how they operate. I've flown Avianca for years and think they have a great in flight product... hopefully they will do as they say and take the best of the two and implement them (starting with a FF program). Any ideas how the hubs will work with BOG, SJO, SAL, and LIM?

[skyteamelite]

I agree that AV’s in-flight product (especially on the medium- and long-haul) is not bad at all. Same applies to TA’s. Unfortunately, AV doesn’t really shine when it comes to punctuality, and their customer service (both on the phone and at the airport) is useless.

LIM is TA’s main hub for access to South America, and SAL is their main hub for access to North America. Because they operate aircraft of the Airbus 320 family, they cannot fly direct, say, from LIM to YYZ, and fly through SAL instead.

AV will bring wide-body aircraft into the alliance, which will offer new opportunities for TA as well, for instance in terms of new routes that can be operated, mainly out of LIM, a hub with great potential.

BOG also has great potential. Bogota is a metropolis with over 8 MIL inhabitants, a business centre within the Americas, and could work as a hub, if it wasn’t that the airport is congested (as is SJO), old and plain horrible. They are renovating it now, the cargo area has just been finalised… But I doubt we’ll get to see the new passengers terminals any time before the end of 2012 (I hope they prove me wrong!)

The main difference between the two Central American hubs is that SAL is the gateway to North America, whereas SJO is more of a Central-South America hub. They manage to keep both of them for the time being thanks to all the feeder flights TA has: both international and national/regional ones. The latter are the main reason for the strength of the TA brand in Central America; they have regional subsidiaries (TACA Regional) in almost all Central American countries.

So the four hubs will stay for the time being…

Also, the purchase of 2K (Ecuadorian Aerogal) by AV is still work in progress. The deal should be closed by year end. Initially 2K will keep operating as a separate brand.

On the other hand, it is confirmed that both OceanAir (Brazil) and VIP S.A. (Ecuador) -both of which already use the AV livery and are already owned by the Synergy Group which owns AV- will change their names to Avianca over the next few months.

[AdamSouthFL]

There's no doubt that BOG will remain a hub. I can't imagine 4 hubs though. I am sure SJO or SAL will be reduced to a focus city.

I really hope this merger comes with some improved schedules. I fly mainly MIA to LIM and would like to take AV more but there are 2 options... leave MIA in the morning and have a 3hr 40min layover in BOG or leave in the afternoon with 1hr 45min layover but arrive to LIM at nearly 1:00 AM. Usually what I do is fly MIA-CTG with a stopover and then CTG-LIM, and inbound LIM-MIA/FLL... it's only a few dollars more for the stopover.

I can't find the link but I read that AV says they are not going after LAN or Copa with this merger but rather to compete more with North American and European airlines. I do hope to see more domestic flights in Peru even though LA will be kicking and screaming.

I also hope AV maintains its daily FLL flight.

And, to add to my wish list, I hope they streamline their elite upgrade process like TA... I see so many J seats on AV go out empty.

[skyteamelite]

Originally Posted by AdamSouthFL

And, to add to my wish list, I hope they streamline their elite upgrade process like TA... I see so many J seats on AV go out empty.

I fully agree on that one... Let's hope they get cracking on those FFPs ASAP. Being a member of both AV and TA FFPs, I have no idea what will happen...

Anyone remember what happened after the AF-KL merger with those people who were members of both Fréquence Plus and Flying Dutchman? Were miles from both accounts merged into the same Flying Blue account? How about Elite-Qualifying miles?!

[skyteamelite]

The Executive Board of the new Avianca-TACA holding seem to have agreed, in principle, on the basic expansion plans for the short- to mid-term. The four hubs are here to stay for the time being and all four will in fact be strengthened starting at the beginning of 2010. The new routes would include:

From SAL:
- Direct flights to BOG
- Direct flight to LIM
- Direct flights to the US West Coast (connecting with LIM-SAL-LIM flights)
- Direct flights to MAD on A330 (connecting with LIM-SAL-LIM flights)

From SJO:
- Direct flights to the US East Coast
- Direct flights to the Caribbean
- Better connections to Colombia (better schedules to BOG, new direct flights to MDE, CLO and CTG)
- Better connections to LIM

From BOG:
- Andean countries (Ecuador, Peru, Bolivia, etc.)
- Caribbean
- US East Coast
- Europe
- Enhanced connections to LIM

From LIM:
- Direct to South America
- Direct to US East Coast (TA-coded flights using 767 or possibly the new A330)
- Central American through SJO and SAL
- US West Coast and Europe connecting through SAL and BOG
- Possibly a direct LIM-MAD flight.

Flights linking BOG and LIM: 4-5 daily in each direction;
Flights linking BOG and SJO: 2 daily in each direction;
Flights linking BOG and SAL: 1-2 daily in each direction.

[Open Jaw]

Do you think that this merger will affect DL or UA? UA is a TA partner while DL is with AV. Maybe they both can remain partners in the new program? It seems to work well for AS which has agreements with both AA and DL.

[AdamSouthFL]

That's a good question and I wish I had the source but unfortunately I have read a dozen online articles about this topic and can't remember where I read it, but they believe they can maintain separate agreements with airlines in different alliances, and they are not looking to join an alliance as of now because they have the flexibility to work with any airline. The merger of these two airlines will include agreements with airlines in all 3 alliances (IB, MX, UA, AC, and DL).

It really seems like they are going after AA and LA with this merger. IF BOG is a USA hub and there are 5-6 dailies of BOG-LIM-BOG??? Wow!

[skyteamelite]

Here’s the link to an interview with AV’s top executive stating that they are not looking to join any alliance and would rather stick to bilateral agreements (code-share, reciprocal mileage accrual and redemption, etc.):

http://www.flightglobal.com/articles...-villegas.html
(They refer to alliance membership at the end of the “Out with the Old” section).

I think that, first of all, IB’s OW partners (mainly LAN and AA) may no longer be very happy with IB continuing its code-share agreement with AV/TA.

Second, AV wouldn’t have been let into any of the 3 alliances so far anyway! Their website, customer service, punctuality records, FFP (and I’ll stop there) are far from being in line with the standards of world alliances. So Villegas says they’re not interested in joining an alliance, but truth is, no one has really been interested in having them!

If both AV and TA keep improving (especially the former!), things may well change. If they really are going after LAN and AA, they cannot be so naïve as to think that membership of an alliance (and therefore the possibility of accruing both award AND ELITE-QUALIFYING miles) wouldn’t play a huge role in passengers’ choices as to which airline to fly. This applies especially to frequent business flyers, whose business tends to be very dear to airlines.

My guess is that AV/TA’s best alliance match would be ST, which is losing CM/P5 (together with CO) at the end of this month (ooops… in 2 days in fact!!!). OW is not an option of course. A* is not to be excluded, but it seems more likely that rival CM will join in, which will make it more difficult for AV/TA to want to go the same way…

[Open Jaw]

Originally Posted by AdamSouthFL

That's a good question and I wish I had the source but unfortunately I have read a dozen online articles about this topic and can't remember where I read it, but they believe they can maintain separate agreements with airlines in different alliances, and they are not looking to join an alliance as of now because they have the flexibility to work with any airline. The merger of these two airlines will include agreements with airlines in all 3 alliances (IB, MX, UA, AC, and DL).

It really seems like they are going after AA and LA with this merger. IF BOG is a USA hub and there are 5-6 dailies of BOG-LIM-BOG??? Wow!

When a Colombian friend of mine was thinking of joining AV's FF progam I told him that DL would be a better fit because DL has a lot more earning possibilities than AV.

Personally I love the fact that AV is a partner of both DL and MX because it allows me more flight options. I will have to do some more reseach on which program will give me more miles when I head to Colombia in 2010.

[AdamSouthFL]

Originally Posted by Open Jaw

When a Colombian friend of mine was thinking of joining AV's FF progam I told him that DL would be a better fit because DL has a lot more earning possibilities than AV.

I think that would depend where your friend lives. If he lives in COL, I think AV would be a better choice so as to accumulate miles with partners like Exito, etc.

And as far as AV's punctuality, they've improved. In 2005 I swore I would never fly them again. After 12 segments on AV this year, all have been on time or early.

The FFP leaves a lot of room for improvement but I like the bene's I get as a lowly AV Gold (22K miles) such as priority seating (except exit row as they don't think my Spanish is good enough) but row 7 on the A319/320 is great, as is lounge access both in COL and abroad. I always use the lounge in MIA and the Sumaq lounge in LIM... they give me a pass no matter what class I am in.

So skyteamelite, I don't know when your last flight was but things are a lot different now.

[Open Jaw]

Adam, My friend lives in the US and he decided on joining DL instead of AV.
He raves about the in-flight product of AV. For this reason, I will be flying them next year.

[skyteamelite]

I’ve been living in Colombia since February this year. Just before moving here, I had already spent the previous 2 years living in South America.

This year, I’ve flown at least 8 round-trips A MONTH within Colombia (domestic flights). Out of these, 5 on average were on AV. As for international flights, I have flown AV 3 times this year (once to Ecuador and twice to the US).

True, the 2 medium/long-haul round-trips to the US were on time. So, if I were living in the US and sporadically flew AV to come to South America, I would probably be pleased with them.

But the domestic flights record has just been appalling. Always late, no announcements made to justify or explain delay, a couple of cancellations, overbooking, etc.

True, as an elite passenger at least I always get to wait in their business lounge. But whenever I can, I choose P5 (100% owned and managed by CM) for domestic flights. Their service is impeccable, I accrue CO/CM OP miles flying them and their punctuality records are unheard of:
http://www.aerorepublica.com/noticia.php3?nt=314 (in Spanish).

They even opened a VIP lounge in the BOG domestic flights terminal, and all OnePass elite (even Silver Elite) members have access to it:
http://www.aerorepublica.com/noticia.php3?nt=308

I have only had to fly AV to Europe once (I fly AF whenever possible). Flight on time, very nice staff, clean new plane with more than decent IFE, but unfortunately inedible food

So, nothing against AV, I do acknowledge they have come a very long way over the past 5 years. I just really hope they keep up the good work, as they still have a very, very long way to go… and I do wish them all the very best, as I would love to see the new AV/TA/2K/O6/VIPSA group do better than LAN in the Americas!