(Bloomberg) -- Colombia’s Avianca Group International Ltd. and Brazil’s Gol Linhas Aereas Inteligentes SA will unite under a common ownership structure, creating what they say will be one of the largest airline groups in Latin America.
The airlines’ principal shareholders agreed to form Abra Group Ltd., a closely held company incorporated in the UK, the carriers said Wednesday. While the airlines will continue to operate independently with their own executive teams and brands, the shared ownership will strengthen their balance sheets and provide opportunities to expand, said Roberto Kriete, who will serve as the group’s chairman.
“Cost wins,” he said in an interview. “And we will have the most competitive cost structure in each of the markets in which we operate.”
Abra Group will rival Chile’s Latam Airlines Group SA as the biggest group of carriers in the region based on fleet size and network, the companies said.
The deal, which is expected to close in the second half of 2022, marks the most significant consolidation for the region’s air travel sector since it was upended by the pandemic. Carriers were forced to ground fleets due to government shutdowns and a drop in demand, racking up huge losses. Three of the largest airlines, including Avianca, filed for Chapter 11 bankruptcy.
Since exiting Chapter 11 in December, Avianca said it has received $1.7 billion of fresh investments.
Constantino de Oliveira Junior, who founded Gol in 2001, said it is an opportune time to form the new structure. The airlines currently have more than 250 aircraft and fly to destinations across Latin America, the US and Europe.
“We’re talking about the lowest costs in the region, a group with one of the strongest balance sheets and lowest leverages,” said de Oliveira, who will serve as chief executive officer of the group.
Shares of Gol rose as much as 5% in New York trading Wednesday before paring gains. The stock will continue to trade after Abra gains regulatory approval, though the fund that controls Gol will transfer its shares to the Abra structure, de Oliveira said.
The group has lined up an additional $350 million in investments once the deal is approved. Abra will also own a non-controlling 100% economic interest in Viva’s operations in Colombia and Peru and convertible debt representing a minority interest investment in Chile’s Sky Airline.
Customers will eventually have access to a “seamless” experience where they can combine flights from carriers on a single ticket, de Oliveira said.
(Updates with details starting in first paragraph.)
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