Earlier, I covered how Azul filed for Chapter 11 bankruptcy protection. On the surface, this isn’t a huge deal, since operations should continue as usual, and this is just a balance sheet exercise.
Continue reading: Will American, Azul, And GOL, Form A Throuple? What About United?
Share your questions, experiences, and thoughts below.
United is friends with Copa too, no? Not exactly S. America but feeds into much of it.
Reminds me of 1989, when a dying Pan Am announced a "groundbreaking" partnership with Malev, the wet-toast airline of freshly ex-communist Hungary.
It was the best date Pan Am could get, given the state they were in. They couldn't get Lufthansa, or Alitalia, or Air France, or British Airways, or Swissair. Just Malev, an airline even most Europeans had never heard of.
Avianca leaving *A and going to OW sure would be interesting! AA's MIA/JFK focus could be a lot more appealing for connectivity, and United would still have Copa in that part of the world to partner with.
Also, the South American JetSMART is now part of the AAdvantage® program. Flying JetSmart earns AA miles. Redeeming AA miles for JetSmart flights is not yet available.
It's clear that AA is trying to find a way to regain the losses from the end of the LATAM partnership in South America. However, I am interested in how AA's new focus and investments on improving the experience for passengers will affect their ability to follow through on their South America strategy. Growing Azul at GRU or developing VCP will cost a lot of money. Is AA willing to take that on in conjunction with their investments in themselves? They are already in debt from their fleet renewal since the US Airways merger and with their subpar profits compared to DL and UA, I'm curious if they will follow through on such a strategy for South America. Perhaps they will find other investors for Azul to finance such a project? This is extremely interesting and I also look forward to watching this unfold!
If it makes United feel any better, in any throuple at least one party is basically just watching at any given point in time
interesting discussion and speculation based on what we know but Gol has not yet emerged from Chapter 11 although its plan of reorganization has been approved by the US bankruptcy court.
It is far easier to do a merger in bankruptcy or acquire a company directly out of bankruptcy but much harder to execute a merger after a company has already emerged as a planned standalone company.
While there are plenty of people that think that Brazil is going to allow the merger of 2 of the 3 large carriers, both Azul and Gol serve multiple countries in Latin America as well as the US - as do both AA and UA. A merger will require approval of those countries and even more so if a joint venture is proposed with a US carrier.
And joint ventures are where the real benefit is; AA could easily do a JV with Gol which does have some narrowbody flights to the US. Of course, Azul also has service to the US that largely duplicates what AA has - which will raise antitrust concerns.
as for the comment that DL overpaid for Latam, they really paid at the wrong time. They bought a couple billion dollars of Latam equity just weeks before covid broke out. DL has managed to retain its equity both in AeroMexico and Latam through their separate chapter 11 filings and DL is arguably in the best position in Latin America with AM and LA covering Latin America - although they do not have JVs with each other but rather each w/ DL. DL execs say that the DL/LA JV generates more revenue than any single airline in Latin America, meaning AA.
AA and UA couldn't do anything with DL's JVs with AM and LA but this presents the opportunity for one to beat out the other. With AA and UA trying to land the fatal blow against each other in Chicago and NYC, this fight will be one that AA has no choice but to win.
How is DL the best positioned in LATAM when it's #3 in revenue and capacity in LATAM behind UA and AA? Also LMAO on the revenue point for LATAM and DL - look at the numbers for FY24:
- AA LATAM revenue: ~$6.6B
- DL LATAM revenue: ~$4.0B (note: LATAM says DL holds 62% of the JV capacity)
- LATAM revenue: $12.7B: ~15% of this revenue is cargo and other income. Of the remaining passenger revenue (~$11B), ~45% of this revenue is intl (~$5B) of which the US is ~40% (~$2.0B) - not all of this revenue comes under the JV
If you would take even a second to fact-check your claims with actual data then you could make more accurate statements and speculation.
The loss of LATAM was a blow for AA, but as long as it has a fortress hub in MIA, it will dominate in Latin America to the US since MIA alone accounts for almost 50% of the US market.
The LATAM-DL JV has made little inroads in Miami - we'll see how the MIA-EZE route does for LATAM, but it was followed by capacity dumping by AA and Aerolineas Argentina that will hurt yields for all but especially the newcomer LATAM with little existing loyalty or corporate contracts.
Given there's more to AA's LATAM service including the Caribbean from Charlotte, Dallas, and from JFK (note that DL has retreated from much of JFK and LAX to close-in Central & South America since 2023 including JFK-BOG, LAX-SAN, LAX-GUA, LAX-MZT, etc. while operating routes like JFK-EZE seasonally vs AA's year-round). Add in competition from UA at IAH, there's little reason to see why AA would lose its position. There's always room to strengthen and take share in the chess match that is aviation.
I don't think that's going to happen. Why would AV want to leave the biggest alliance in the world?
I suspect that the folks at AA don't really understand the competitive landscape in that part of the world. That's not really a criticism of them - after all, I wouldn't profess to understand, or have any interest in, the business model of Southwest Airlines- but the lack of knowledge couldn't possibly help in their efforts to set up partnerships etc.
take a step back from the cliff, son
I said that DL execs said that the DL/LA JV DOES generate more revenue than any single airline that serves Latin America.
Not a single number you wrote says that is not the case despite your manipulation of data to try very hard to keep from admitting that AA was dethroned.
In case you missed the distinction, I said that DL and LA are the largest TO S. America, not Latin America.
yes, DL and LA are the largest single entity to S. America.
AA frequently flies more capacity from MIA to S. America than AA.
DL clearly decided it is not necessary to provide a bunch of feed to LA in MIA since DL and LA can and do connect traffic over the rest of their combined network outside of MIA.
Yes, the loss of Latam was a blow to AA but it was a strategic failure to think they would have ever gotten it across the finish line.
and DL and LA are the largest carriers from both LAX and NYC to Latin America. not AA and not UA.
the only missing peace of the puzzle is when or if DL decides to add flights from MIA to Central America and the Caribbean. Given that DL has a JV with AM for MIA to Mexico, there is a whole lot less of the MIA market that DL doesn't access on its own metal or via a JV than you would like to believe.
Instead of lecturing me to check data, how about you read and comprehend the difference between Latin America and S. America.
even if we take your numbers, to have DL and LA within 10% of AA should scare the fire out of AA - and it does.
corrections
LA frequently flies more capacity from MIA to S. America than AA
the only missing piece...
Ben,
1/ Isn't it called a Threesome or does that term not apply to airlines?
2/ Re Viracopos: Before Guarulhos existed, Viracopos was Sao Paulo' long haul airport, about 70 miles away with (then) no freeway, to the point that VASP (disappeared airline) had expensive feeder flights from Congonhas for those who didn't want the 3 hour trek.
BUT... Viracopos is also the airport for Campinas, a nearby Brazilian city of some 1.3 milliion inhabitants. Plenty of airlines in the world have their headquarters and main hub in less populated cities.
Simply put Avianca has much better OneWorld hubs than *A.
People from Colombia and Latin American in general are going to Madrid and Miami both strong OW locations. They are not going to Houston and Frankfurt. Not in the same numbers at least.
They used to fly to MUC and can start doing that again. If anything, Iberia is one of their biggest competitors, and it retains a close relationship with their arch rivals LATAM. At the same time, LH/LX often publish fares to Chile/Bolivia/Paraguay with connections on Avianca beyond BOG. Defecting doesn't seem too clever to me from an AV perspective, although stranger things have certainly happened in the past.
São Paulo is simply a much larger city and GRU serves most of the demand - domestically from GRU and CGH and internationally from GRU.
VCP serves the much smaller local Campinas local market as well as connections that Azul connects through VCP.
They do not have a large size at GRU or CGH.
The problem w/ a Gol/Azul merger is not concentration in São Paulo which is the largest market in Brazil but the many mid-sized cities that are dependent on connections and are competitive markets between the 3 carriers right now.
@Pierre - A threesome is a momentary act, a throuple is the term used to describe a relationship with three people.
There is no way that Avianca and Azul are happy with United. Through their lack of in-depth partnerships, UA has shown clear disregard for the market.
I'll admit that AV is a stretch, but Azul is a very realistic possibility. A joint business venture can be formed sooner rather than later (see AA/JL), and yes it would be complimentary.
The GRU/VCP split wouldn't be a big deal if there was a JBV.
Not sure what the latest on this is, but United, Avianca, and Copa were working on a joint venture in 2022: https://www.flightglobal.com/networks/avianca-copa-united-to-pursue-joint-venture-pact-under-new-conditions/150580.article. Both Avianca and Copa are also preferred partners, reflecting the closer relationship UA has with them. (It's otherwise only JV partners that are "preferred".)
I thought I remember reading there were delays since the Avianca was restructuring, and UA might also want to bring Azul into the fold, but maybe I remember wrong.
Ben,
"GOL only flies 737s and doesn’t have business class, so it’s hardly a full replacement for what was lost with LATAM."
On equivalent narrow body aircraft, LATAM doesn't have business class either. And, I'm fairly certain, GOL has more legroom vs LATAM.
An odd statement when LATAM doesn't have business class on the equivalent aircraft either.
The most important thing is that GOL stays as an Aeroplan partner, because linking a GOL flight with a UA flight avoids Aeroplan award dynamic pricing.
You can use flying blue miles for their flights- redemption rates are reasonable apart from the fact that they don't include luggage.
I just want to know what is going to happen to my Azul shares. How long is trading will be suspended?? Why this is not trading OTC yet??
Kinda surprised Ben didn't even mention JetSmart, I mean they use AAdvantage as their Loyalty Program and are based in South America (Chile, Peru, Argentina, Uruguay, Paraguay). I get they are huge, but they aren't a small player either.
Latam has a “premium economy” in the first two or three rows of domestic flights with the middle seat blocked, which is a godsend for the always crowded flights to and from anywhere in Brazil. The service is basic but kind and gentle with a crap sandwich and junk food but it’s a HUGE step up from the normally dismal Brazilian domestic service, which is embarrassingly basic. On top of it the extra cost is often a pretty good deal.
Fascinating market dynamics in Brazil: all three airlines are in chapter 11 (avianca a doesn’t even exist so not worth the mention). Latam has been operating happily in chapter 11 for FIVE years! What a great business when you don’t have to pay a cent to your bondholders. Gol went into bankruptcy last year when delta appears to have pulled its credit lines (and kept its equity position). Azul was smallish and had Tap and was a kind of star alliance partner. Covid has caught up and it threw in the towel last week (although slightly more dignified than the other two which just walked away from their debt: azul gave an equity kicker). Then I see azul is doing flights for Gol. Go figure.
What a mess. Foreign ownership rules means no foreign airline can own more than 20% (correct me if I’m wrong it could be 30%) so forget a build out narrative; it’s just minority stakes. I have watched latam move from AA, only to become a semi-star alliance (that actually worked very well) and now, I cant remember and don’t care.
This isn’t only about American access to Brazil, the Europeans are crazy to find their way in to a market of 220 million people. The AF/Gol alliance (not sure what klm/AF ownership is in Gol anymore, used to be less than 20%) is by far the most credible…I think I even got XP points for a gol connection a few months ago! But flying LP on AF or even biz and then arriving in São Paulo to grab a crowded 737 with zero possibility of biz class and a cookie and stale coffee for a 3 hour connection up north is almost humiliating. It’s while I’ll often take my chances with a separate connection on latam to get at least premium economy…
Clearly the pandemic killed them and the government didn’t step in (right or wrong I don’t know), so GOL quadrupled its debt in 4 years. But every time I grab a one hour FULL (always) São Paulo Rio flight and pay $500, I wonder what the problem is. Pass the popcorn…Brasil não é para amadores…
Throuple? …. How can an alliance of three airlines be described as romantic or sexual?
It was a grave mistake for the Brazilian government not to rescue its carriers during COVID. Every airline across the world got funding to continue operations, and making airlines rack up debt for something that was not their fault was a grave government misstep. Now, its carriers are bankrupt. No surprise there.
What a piece of bs in the article. GOL is same size as avianca. On narrow body both avianca and gol does not have buissness class product. They do offer economy premium but for both airlines not all narrow body routes offer that service. Finally GOL and Avianca cooperate a lot of, they have code share on all brazil - colombia flights and gol feeds avianca so you can buy: manaus -> bogota -> new york on gol website.
Very interesting article. A recent development is even more intriguing… with Abra Group getting 330neo for GOL future long hauls flights, a company who just uses Boeing and while Avianca uses 787 for their long hauls! 330neo is what Azul uses!!!
I commute regularly between Orlando and São Paulo and I use either Guarulhos or Viracopos a lot. No issues with it. Up to the best price.
Uber from central São Paulo to Guarulhos is around $20 for a 45’ drive and to Viracopos is around $50 including tools for a 1h15’. Both driving time without traffic.