Home Aviation Azul Makes Agreement to Buy Avianca and Threatens Hegemony of Gol and...

Azul Makes Agreement to Buy Avianca and Threatens Hegemony of Gol and Latam

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With a proposal of more than R $ 400 million, Azul will have 30 aircraft currently operated by Avianca and will win another 70 slots (landings and takeoffs authorizations); with the business, the company will be closer to traditional industry leaders

The airline Azul said Monday it has signed a $ 105 million ($ 404 million) bid for the purchase of Avianca Brasil, which has been under judicial reorganization since December 2018. The deal between airlines should include Avianca’s air operator certificate, 30 aircraft, and 70 landing and take-off authorizations at airports in Brazil. The company’s debts, which exceed R $ 1 billion, will be left out.

Under the current structure of the companies, the new company would own 31% of the domestic market, becoming the second largest in the country. However, Azul will have to dry Avianca, which now operates with 48 aircraft. Following the announcement, Azul shares rose 6.45%.

The purchase of Avianca also guarantees Azul greater participation in the airport of Congonhas, the old objective of the company. The terminal is the most disputed in Brazil in authorizations for landings and takeoffs, the so-called slots. Currently, Azul is the smallest airline in Congonhas, with 13 daily slots. Avianca has 21.

Although the agreement was non-binding, which means that Azul may withdraw from the purchase without punishment, it provides for an injection of resources for Avianca to operate until the conclusion of the deal. The state has determined that the contribution should vary from US $ 20 million to US $ 40 million.

For the business to be completed, companies must win several controversial points. It will be necessary for creditors to approve, and especially, that the owners of the aircraft that will be included in the collateral business.

Avianca’s leasing companies – which the company owes about $ 150 million – have vied for their possession in court since late last year. According to documents submitted by Azul on Monday, the intention is to renegotiate the rental prices of these aircraft, which may not be well received by the lessors, two sources involved in the negotiations said.

There is also the fact that the National Civil Aviation Agency (ANAC) prohibits the sale or assignment of slots, as it considers that they are not properties of the airline. The state has learned, however, that the companies are formatting a business model that has great chances of passing through the screen of Anac. The idea is to create a kind of subsidiary that has a different shareholding structure and holds the assets that will be marketed.

“The regulation prohibits the marketing of slots but does not prohibit, in any way, the sale of airlines themselves. Everything will depend on the corporate structure established (by Azul and Avianca) and the analysis of Anac and Cade (Administrative Council for Economic Defense), “explained lawyer Felipe Bonsenso, specializing in aeronautical law.

A source close to the companies said that the process, including analysis of Anac and Cade, is expected to be completed in three months. In the antitrust body, there should be no obstacles, said the same source, since the two companies have few overlapping routes. In addition to having complementary airstrips, Azul and Avianca also use the same model airplane – which facilitates the transition to the buyer.

Also on Monday was the judgment of the grievances of an instrument of the lessors who want to resume the aircraft. According to sources who accompanied, the rapporteur of the case Ricardo Negrao voted against Avianca and criticized the transaction with Azul. The trial was suspended by the request for views of Judge Sergio Shimura. In addition to the postponement, Avianca was able to anticipate from April 15 to March 29 the meeting of creditors.