There’s some major airline consolidation coming to Latin America…
In this post:
Abra Group to own Avianca & GOL
It has today been announced that two of Latin America’s biggest airlines, Avianca and GOL, have signed an agreement to create a leading air transportation group across Latin America, under the holding company structure named Abra Group Limited. Interestingly this comes just shortly after Avianca announced plans to acquire low cost carrier Viva Air, so Abra Group will also own that airline.
As far as the details of the merger go:
- It’s stated that the airlines will maintain their independent brands, talent, and culture, while benefiting from greater efficiencies and investments under common aligned ownership
- It’s claimed that customers will benefit from the best fares, access to more destinations, more frequent flights, seamless connections, and the ability to earn and redeem points across Avianca LifeMiles and GOL Smiles
The goal is for Avianca and GOL to have the lowest unit costs in their respective markets and the leading loyalty program across the region, all while achieving greater economies of scale. The group will be co-controlled by the principal shareholders of Avianca and the majority shareholders of GOL.
Here’s how Roberto Kriete, Abra Group’s Chairman, describes this plan:
“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.”
Meanwhile here’s how Constantino de Oliveira Junior, Abra Group’s CEO, describes this plan:
“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.”
This deal is of course subject to regulatory approval, so I’m curious to see how that goes. Obviously multiple countries will have to sign off on this, so I would assume this deal is far from a sure bet, especially with the recent announcement that Avianca would acquire Viva Air.
My take on an Avianca & GOL merger
A few thoughts on a potential Avianca & GOL merger, in no particular order:
- I’m not well versed enough on anti-trust laws in Latin America, so I’m not sure what the odds are of this deal being approved; I do know regulators in the past have struck down joint ventures over competitive concerns, so I have to imagine there’s some risk this won’t be approved
- It’s interesting that the two airlines would continue to be operated separately under their own branding; there’s lots of precedent for this, like the Lufthansa Group (Austrian, Lufthansa, SWISS, etc.), IAG (Aer Lingus, British Airways, Iberia, etc.), and the Air France-KLM Group (Air France and KLM)
- While Avianca and GOL are complementary in terms of their route networks (at least within Latin America), the two airlines have very different business models, with GOL being a regional low cost carrier, and Avianca being a global hybrid carrier (mostly low cost on short haul routes, but full service on long haul routes)
- Even if the two airlines maintain their own branding, I can’t help but wonder what this means for alliances; Avianca is in the Star Alliance, while GOL has a partnership with American, including that American owns a stake in the airline
- Will Avianca remain in the Star Alliance and GOL will join the Star Alliance as well, could Avianca and GOL both partner with American, and maybe even join oneworld, or will the two airlines just maintain their independent partnerships?
There are lots of questions and not many answers so far…
Bottom line
Avianca and GOL have announced plans to merge, with the creation of a new parent company. With this plan, the two airlines will maintain their own branding, but would benefit from other synergies.
Now it remains to be seen whether regulators approve the deal, and also what exactly this would mean for the future of the two carriers’ partnerships, alliances, and business models. After all, there are quite some differences there.
What do you make of plans for Avianca & GOL to join forces?
Avianca has been drifting in a LCC direction for years. If the new group maintains both brands, with GOL remaining LCC and Avianca returning to its full service roots, that would be a win for everyone.
Well obviously anti trust is going to approve it's "merger" it's not a merger...just a conglomerate?!maybe...they approved the merger of LAN and TAM...why not the association of these two airlines...much more impressive is the fast growing of airlines like Azul airlines
Come on over to OneWorld!
I've also been surprised by this announcement, but I'm happy to share a little more insights, based on the Latin American media (in particular the ones from Colombia):
1. The merger between Avianca and Gol should not face any major risk from anti-trust authorities, because (a) their networks/markets are largely complementary and, perhaps more importantly (b) anti-trust authorities in Latin America mainly have a national perspective.
2. The take-over of Viva (Colombia & Peru) has...
I've also been surprised by this announcement, but I'm happy to share a little more insights, based on the Latin American media (in particular the ones from Colombia):
1. The merger between Avianca and Gol should not face any major risk from anti-trust authorities, because (a) their networks/markets are largely complementary and, perhaps more importantly (b) anti-trust authorities in Latin America mainly have a national perspective.
2. The take-over of Viva (Colombia & Peru) has been completed, although technically they still don't have control. Here they face some anti-trust issues in Colombia, which is one of the reasons why they still have not assumed control.
3. Additionally, there is a debt-share deal between the newly formed group and Sky, a Chilean airline. They plan to include Sky into the commercial model. This means that the new Abra group will be strong in Brazil, Colombia, Peru and Chile. The only major market not well covered is Argentina (both Gol and Avianca fly there, but have no domestic operation).
4. In terms of business model, in my own experience, the differences have leveled out. Avianca has stopped offering Business class on short hauls, instead they offer "Plus" seating. Pretty much what Gol had already offered with "Max" for a couple of years. Intercontinental long-haul is only offered by Avianca.
5. In terms of alliances, it complicated matters. American holds a share of Gol and United tried (not successfully) to associate with Avianca, but still has ties. Viva is classical low cost, i.e. no alliance, and so is Sky. Not sure where this ends.
The media in Latin America are clear that this is mainly aiming at Latam.
On the bright side, we might be able to redeem LifeMiles on QR for the highly competitive price of GOL.
That would be amazing.
GOL and Qatar have suddenly out of nowhere ended their partnership a few months ago.
Unless and until they get better connectivity throughout and within the Southern Cone countries, they will never be able to compete effectively with LATAM.
They would already gain a huge presence in Peru and Chile with Viva, and if not with Sky.
If this kills Lifemiles for LH first class life is no longer worth living
That’s is officially - quote of the month ! Cheers !
I hope they both go to Star Alliance … since bankruptcy of Varig, the Star Alliance is weak in Brazil and South America
That was my very thought the second I read the news!
I see a train wreak coming. It's not like there ground customer service agent is great from the beginning. Flight attendant are actually ok but still. Train wreak.
Avianca Brazil has always been a separate airline from the main Avianca from Columbia.
Avianca Brasil no longer exists for almost 3 years, it went bankrupt.
I don't think Avianca will join oneworld as they are part owned by United.
I would guess if they do anything it will be in SA. United owns more of Avianca then american does of GOL.
As far as I know, the share United holds in Avianca is about 1% and the share American holds in Gol is about 5% ...
I see a America West-USAir-American debacle in their future.