Avianca and Minority Shareholder Kingsland Holdings Withdraw Lawsuits Against One Another Concerning United Airlines Alliance

Both Avianca Holdings S.A. and minority shareholder Kingsland Holdings Ltd. today withdrew lawsuits against one another that were rooted in a disagreement over the Bogotá-based airline’s efforts to form a strategic alliance with United Continental Holdings.

The bitter legal battle has been ongoing since February, but Kingsland stated today in a New York court filing that “the action is hereby discontinued without prejudice.”

Avianca, in a separate filing, withdrew a countersuit it had submitted to the same New York court in March to dispute the claims originally made by Kingsland, which is the second largest shareholder in the carrier with a roughly 15% stake.

“Kingsland and the other parties agreed to discontinue that litigation in order to continue to focus on ongoing business negotiations that, if successful, would resolve their outstanding differences, and are hopeful that they can complete those negotiations in the near future,” said a spokesperson for Kingsland Holdings. “If those negotiations cannot be completed successfully, the ‘without prejudice’ dismissal of the litigation allows the parties to bring new actions against each other addressing existing and future disputes.”

Avianca celebrated the news as a victory. “As we’ve said all along, Kingsland’s lawsuit was meritless and filed prematurely, and we are pleased that the parties have reached an agreement to dismiss both actions,” said Avianca CEO Hernán Rincón. “Avianca is now looking beyond the litigation, and we are pleased that negotiations with United are progressing.”

The conflict began when Kingsland filed a complaint in a New York court on February 28 against Avianca, as well as its controlling parties and United Airlines, alleging that the negotiations with United were not in the best interest of the company.

Specifically, Kingsland, which is controlled by the Kriete family that ran the El Salvador-based TACA Airlines in El Salvador for nearly three decades before merging with Avianca in 2010, characterized the planned arrangement as something aimed to enrich Germán Efromovich, a Bolivian mogul who controls more than half of Avianca’s shares through Synergy Aerospace Corporation and serves as chairman of Avianca’s board.

The original complaint said the United alliance would be an “egregiously one-sided proposed transaction that Efromovich secretly negotiated with United for his own benefit at the expense of Avianca and all of its other shareholders.”

Avianca has considered these claims baseless from the outset and later countersued Kingsland in the same New York court to dismiss the case. “Kingsland’s legal maneuvers are a heavy-handed attempt to obtain greater rights in the courtroom than it previously negotiated for and agreed to in the parties’ shareholder agreement,” stated the court filing.

Though the battle continued to escalate throughout the year, Avianca appears to have overcome this legal hurdle to forging an alliance with United.

Those talks are ongoing, according to Rincón, and on the company’s recent third quarter earnings call with investors, officials said that they hoped the final agreement with United to be completed in a matter of weeks.

Photo credit: Avianca