Chilean daily El Mercurio has reported that Central American investment bank Caoba Capital has taken a 40% stake in troubled low cost carrier Sky Airlines of Chile, with the Paulmann Mast family keeping 60%. The airline, hobbled by the COVID pandemic, has struggled to find outside investment to keep it viable.
The investment, said to be $70 million USD of convertible credit, brings the airline into proximity with both bankrupt Colombian carrier Avianca and Mexican carrier Volaris. Volaris was founded by Roberto Kriete, who previously sold El Salvador-based Grupo Taca to Avianca, but later fell out with then Avianca Chairman Germán Efromovich. After United Airlines took Efromovich’s shares as collateral for a half-billion dollar loan, the US carrier appointed Kriete, and his Caoba allies José Guardian and Rodrigo Salcedo to Avianca’s board of directors.
Caoba is Spanish for Mahogany
Guardian and Salcedo, through Caoba Capital, also have a stake in Kriete’s Volaris. Caoba founder José Guardian previously worked for Roberto Kriete as vice president of finance, treasury, and strategic development for Taca Airlines. Salcedo also served on the board of directors of Volaris.
The deal has caused speculation to take flight on whether there will be any potential tie-ups between Sky Airlines, Avianca, and / or Volaris. Volaris and Sky are both low-cost carriers, but Avianca has a legacy model that would conceivably be harder to integrate. Not only this, Avianca is heavily dependent upon its membership in the Star Alliance, and partnership with United Airlines of the US and Copa Airlines of Panamá.
Caoba Capital, as an investor in Avianca, is well positioned to assemble an alliance involving one or more of the three airlines. In fact, a source told El Mercurio that Caoba will “obviously” seek synergies with Avianca to create a stronger South American network.
All three airlines with ties to Caoba may see their networks under siege, as Colombian low-cost carrier Viva has already begun offering routes into Mexico and filed for permission to begin routes to Chile. Mexico’s unrelated Viva Aerobus has begun Colombia routes, and Avianca’s own Star Alliance Partner Copa’s Wingo subsidiary is cannibalizing Avianca’s home turf alongside Viva.
Volaris seems to be doing well. S&P just this afternoon returned Volaris to its IPC Mexican index, but Sky and Avianca are in much weaker positions facing competition from highly-liquid Copa Airlines and its Wingo subsidiary, and fast-growing Viva, backed by the deep pockets of Cartesian Capital and Irelandia Aviation. Avianca will need to repay the debt-package it is assembling in the hopes of emerging from Chapter 11 bankruptcy in the US court system, and also re-engineer itself to compete in a hotly contested Andean and Central American market that it completely dominated just five years ago.