Avianca Pushing to Form Strategic Alliance with United Airlines

After weighing potential partners for months, Colombian airline Avianca has announced that it is working to form an alliance with U.S.-based United Airlines. Details, including financial terms, of the expected partnership “are yet to be negotiated,” according to Avianca, but the two Star Alliance carriers are planning a long-term arrangement focused on growth.

“Avianca’s board of directors have authorized Avianca to implement all necessary analysis and other steps required in connection with the proposed strategic-commercial alliance with United Airlines,” said Avianca in a statement.

While the still-unknown specifics will be key to judging the agreement, Medellín-based financial services company Bancolombia suggested that the move may hurt Avianca’s stock immediately but should prove beneficial over the long term.

“After months of speculation Avianca finally announced their roadmap and the speculators are unlikely to encouraged,” said the bank in a note to investors. It added that, “whilst the stock has eased back somewhat over recent weeks, we may see more pressure short term as the option for a change of control appears to be receding, although long term these appear solid moves.”

United was among several suitors who had reportedly submitted bids for a partnership last fall. Delta Air Lines and Copa Airlines were also engaged in talks with Avianca, per numerous media reports.

Scott Kirby, president of United Airlines, said his company is looking forward to increasing cooperation with the Colombian airline. “Deepening our relationship allows us to expand on our existing Star Alliance and strategic partnerships in the region as we continue building a great network in Latin America,” said Kirby.

Colombia’s largest airline also announced that its controlling shareholder, Synergy Aerospace Corp, intends to make a capital contribution to Avianca of up to $200 million USD. The capitalization remains subject to regulatory and corporate approvals. “Synergy intends that all of Avianca’s shareholders, including its preferred shareholders, should have the opportunity to participate in such capitalization on a pro-rata basis,” stated Avianca.

Synergy is also seeking to push forward a merger between Avianca Holdings and Avianca Brazil, which is formally known as Oceanair Linhas Aéreas S.A. and controlled by Synergy.

“Avianca’s improved quarterly operating metrics which were recently published, coupled with the proposed capitalization and long-term strategic-commercial alliance with a world-class international airline, all reflect execution of Avianca’s strategy and set the stage for its success in years to come” said Hernan Rincón, CEO of Avianca.