Contributor - South America

Richard Pedicini

As Latin American air transport recovers, Delta Air Lines announced plans to buy 20 percent of South American airline Latam, while shedding its 9 percent stake in Latam competitor Gol, Brazil’s number-two airline. Meanwhile, Brazil’s number-three carrier, Azul, earlier in the week announced a code-share agreement with Colombia’s Avianca.

 


Delta will pay $1.9 billion for the stake&nbsp;and provide another $350 million to aid in Latam’s exit from OneWorld, which will happen when the carrier’s contract commitments to the alliance expire. Delta will also buy four Airbus A350s from Latam and take over its order commitment for another 10 A350s still not delivered. Currently, Qatar Airways operates four Latam-livery A350s, three leased and one acquired when Latam refused delivery. Qatar had announced at the 2016 Farnborough Air Show an offer of $613 million for up to 10 percent of Latam.

 


Chilean courts rejected an earlier attempt by American Airlines to acquire a stake in Latam—the company formed as a result of a merger between Chile’s LAN and Brazil’s TAM in 2012, with the Chilean corporate identity surviving. As Delta only operated one route that also appeared in Latam’s network, the principals&nbsp;believed the merger would more easily pass antitrust tests. Brazil this year removed limits on foreign ownership of airlines.

 


The bankruptcy of&nbsp;Avianca Brasil has roiled Brazil’s airline market this year. The country’s third-largest but fastest-growing carrier, Azul, gained the majority of Avianca’s slots at São Paulo’s Congonhas Airport, where its larger rivals largely had succeeded in shutting it out. Colombia’s Avianca Holdings, a separate company from the defunct Brazilian namesake, has encountered its own problems this year, with a change in control resulting from non-payment of a $456 million loan from United Airlines&nbsp;and a nearly half-billion-dollar loss in the first half of 2019. The new management has aggressively cut unprofitable routes, and the code-share agreement with Azul could signal returning confidence. The Avianca Brasil bankruptcy left Star Alliance without a member based in the country, but the Colombian Avianca remains a Star Alliance partner.

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