Delta, United Potential Buyers for Avianca Airlines
Joe Cortez June 07, 2016
Legacy carriers could invest $500 million in first round of takeover investments.
Two American legacy carriers could be considering a South American expansion, as a Panama-based airline seeks a half billion dollar investment. The Wall Street Journal reports both Delta Air Lines and United Airlines are considering making a bid on Avianca Holdings, after the airline opened up a call for investors.
According to those close to the process, the airline is distributing documents to interested parties, with the hopes of raising $500 million in investments. The call for investors comes six years after the airline purchased competitor Groupo Taca, which operated throughout Central America. Today, Avianca operates 5,400 flights every week across 26 countries in both North and South America as a member of Star Alliance.
While American Airlines has an alliance with South American carrier LATAM through oneworld, the other two legacy carriers have a limited reach across the continent. Delta’s only regional SkyTeam partner is AeroMexico, while United is connected with Copa Airlines through Star Alliance.
Investing in foreign airlines has been long considered a precursor to expanding reach and forming alliances between international carriers. Prior to their merger with United, Continental held a 51-percent stake in Panamanian flag-carrier Copa. In 2011, Delta made investments in Brazil’s Gol and SkyTeam partner Aeromexico. By 2015, United invested $100 million in Brazilian carrier Azul Linhas, forming a partnership with the low-cost carrier. Earlier this year, Delta suggested they may be interested in increasing their Gol investment, up to a 100-percent purchase.
Both sources told Wall Street Journal the discussions were in the preliminary stages and no commitments have been made. Neither airline has publicly commented on the report.
[Photo: Getty Images]
Yes, United and Avianca already partner as part of the Star Alliance network but purchasing equity creates much closer ties and can influence decisions made much more efficiently. Take for example, Delta and Virgin Atlantic and Etihad and the number of airlines they've invested in. If part of a joint venture, schedules, aircraft and revenue can be coordinated, so the benefits for the airlines are significant - much more than providing frequent flier benefits as part of the Star Alliance network.
You wrote: "Delta’s only regional SkyTeam partner is AeroMexico". Not quite true. They also have Aerolineas Argentinas as a SkyTeam partner in South America. Plus they also have non-SkyTeam partner GOL (based in Brazil).
Avianca is Star Alliance and as such is already a partner with United.
What's gonna happen to Lifemiles?