Shareholders Of Viva, Avianca & Gol Announce The Creation Of Abra Group To Dominate South American Skies

The controlling shareholders of Brazilian low cost carrier Gol and Colombian legacy carrier Avianca have announced the creation of a multi-company South American aviation holding group called Abra Group, which will also own but not control competing Colombian low cost airline Viva. Abra Group will also own convertible debt issued by struggling Chilean carrier Sky Airline.

In a statement, a spokesperson for the nascent group said that the airlines will all maintain separate brands, employees and culture, but passengers will benefit from synchronized connections, co-ticketing, and cross compatibility between loyalty programs such as Avianca’s LifeMiles and Gol’s Smiles.

Salvadorean airline tycoon Roberto Kriete (above photo) will serve as the chairman of the group. Kriete grew TACA airlines, founded by his father, into a significant regional airline until it was sold to Avianca, and Kriete became a major shareholder of the Colombian airline.

Adrian Neuhauser, current President and CEO of Avianca, and Richard Lark, current CFO of GOL, will serve as the group’s Co-Presidents, while Gol founder Constantino de Oliveira Junior will serve as the group CEO.

“Our vision is to create an airline group that tackles 21st century issues and improves air travel for our customers, employees, and partners as well as the communities in which we operate. Our customers will benefit from access to even better fares, more destinations, more frequent flights and seamless connections, and the ability to earn and use points across the brands’ loyalty programs. They will also be able to enjoy enhanced travel benefits and access to superior products and services,” said Chairman Roberto Kriete.

Upon closing, the Group will control Avianca and GOL and, as a consequence, also hold Avianca’s non-controlling economic interest in Viva’s operations in Colombia and Peru as well as convertible debt representing a minority interest investment in Sky. The new entity is based in the UK and privately held.

Earlier this month, Kriete announced a deal with another aviation heavyweight, Declan Ryan, who controls among other airlines, Medellín based Viva Air through his aviation venture capital firm Irelandia Aviation. The deal does not merge Avianca and Viva, but rather places Viva’s ownership into the same holding company that owns Avianca, with Ryan joining the board and contributing his expertise Ryan was once CEO of Ryanair, the European low cost airline founded by his father, Tony Ryan.

This complex, multi-level merger under a new holding company still faces regulatory and practical hurdles, as approvals are needed from Colombian, Brazilian, Peruvian, and possibly Chilean regulators. Viva cofounder (no longer with the company) Frederik Jacobsen has come out against the merger. “I don’t believe the AV-Viva merger will serve the Colombian market well. A holding company with a 65% share will not offer the level of competition necessary to advance products and services to the needed level. We are going back to the pre-2012 conditions with airlines unwilling to compete on price to the detriment of millions of Colombians that need to travel by air,” he stated on LinkedIn.

At the very least, some airport slots may have to be surrendered to other airlines such as competitors like Latam and Copa-owned Wingo, in markets where the two carriers dominate, such as Viva’s home base of Medellín or Avianca’s home base of Bogotá.

Viva and Avianca also have very different, almost opposing corporate cultures. Avianca, the second oldest airline brand on earth, is very buttoned down, culturally conservative, even staid. Viva on the other hand, has a youthful, irreverent atmosphere not just in its marketing but it its corporate DNA. On any given day their mascot golden retriever Waffles can be seen romping about their offices. Neckties and high heels are almost unknown. Onboard announcements are purposefully humorous.

“Viva from day one has sort of seen itself as out to slay the aviation Goliath,” said one industry observer with connections throughout both airlines. “It’s hard to get my head around the employees attitude going from ‘we are going to slay Goliath’ to ‘we are going to marry Goliath.’”

For now, the administration and operational control of Viva in Colombia and Peru will not be part of the same holding company, and to that extent Viva’s operations will continue to compete with the airlines that are part of Avianca Group in all the countries where both groups have a presence. Likewise, as long as the authorizations are not achieved, the way in which users, suppliers, employees and entities relate to the different airlines will remain the same, maintaining their internal and external processes, as well as their own sales channels and their customer service services as they are known today.

The three aviation scions behind the move are optimistic.

“This is the perfect setting to continue our strategy of growth and expansion, maintaining the flag of air inclusion and strengthening our company. In addition, if in the future the authorities approve the management of both groups in the same holding, it will encourage the air transport market to continue growing, promoting low rates for users and a good service with the best punctuality, giving everyone the opportunity to fly to many destinations around the world. Likewise, it will be a source of generating qualified employment, giving more and better job opportunities to current and future employees, as well as continuing to positively impact the connectivity of Colombia, the region and the economic development of the country,” said Viva’s Executive Chairman, Declan Ryan when announcing his deal with Kriete.

Roberto Kriete, Abra Group’s Chairman, said: “Our vision is to create an airline group that tackles 21st century issues and improves air travel for our customers, employees, and partners as well as the communities in which we operate. Our customers will benefit from access to even better fares, more destinations, more frequent flights and seamless connections, and the ability to earn and use points across the brands’ loyalty programs. They will also be able to enjoy enhanced travel benefits and access to superior products and services.”

Constantino de Oliveira Junior, Abra Group’s CEO, said: “This agreement places Abra’s airlines in a position to lead air travel within the region – serving a population of over one billion and GDP of nearly three trillion US dollars – providing significant opportunities for capacity and revenue growth. Our unique enterprise structure will allow each airline to drive results by maintaining their independent brands, talent, teams, and culture and will provide employees more opportunities for personal and professional growth at every stage of their careers.”

Abra Group said in a statement that certain financial investors have committed to invest up to $350 million in shares of Abra upon closing, and the closing of the transaction is expected to be completed in the second half of 2022, subject to customary closing and regulatory conditions.

Evercore and RBC Capital Markets are serving as financial advisors and Milbank LLP is serving as legal advisor to Abra Group. Gibson, Dunn & Crutcher LLP is serving as legal advisor to certain investors, and Lefosse Advogados and Brasilpar are advising GOL’s controlling shareholders.