United Continental, Delta Air Lines Eyes Bid For Avianca Holdings SA

Avianca

Avianca is attempting to raise $500 million.

United Continental Holdings Inc (NYSE: UAL) and Delta Air Lines Inc (NYSE: DAL) will possibly bid for Colombia’s Avianca Holdings SA (NYSE: AVH), the second largest airline holding in Latin America by revenue and fleet size, according to people familiar with the matter.

The Avianca deal, if it materialises, will be the latest in a series of recent airline tie-ups. Mergers of airlines have been picking up pace, particularly in Europe, the U.S. and Latin America, as carriers seek to bulk up and broaden their scope amid stiff competition. Eight airlines have merged to become four since 2008 only in the US, and those four serve over 80 percent of domestic capacity. Latin America also saw big mergers, including that of Chile’s Lan and Brazil’s Tam, in 2012, besides the merger of Avianca and Taca.

Avianca is reported to have begun working with a financial adviser to raise $500 million in a process leading to an outright sale, according to an unidentified Avianca source. Delta Air Lines Inc. and United Continental Holdings Inc. are weighing bids for Avianca Holdings SA, a Latin American airline exploring strategic options including a full or partial sale, according to people familiar with the matter.

Comments from Delta Air Lines, United Continental media offices of Avianca in Bogota and San José, Costa Rica, were not available. The process, being in its early stages, may not even lead to a deal at all.

Avianca, one of the largest airliners in Latin America, owns carriers including its Colombian namesake and Tampa Cargo SA in the country, and AeroGal in Ecuador. Avianca merged with Grupo Taca, which had airlines in El Salvador, Costa Rica, Peru, Nicaragua and Honduras. Avianca went public in 2011 and has a market value of about $600 million. The holding’s revenue was $4.7 billion in 2014 with profit, excluding foreign exchange and fuel-hedging charges, at $120 million. As of September 2015, the company had debt of $3.3 billion.

US airlines have been seeking an ally in Latin America airliners as the local economies improve. Leading US carrier, American Airlines Group Inc., is presently operating with Latam Airlines Group SA, formed by the merger of Lan and Tam.

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