Avianca and TACA to Merge

[Eric Diffoot]

Avianca, TACA Unveil Merger Plan


Oct 7, 2009

Darren Shannon darren_shannon@aviationweek.com

Colombian carrier Avianca and El Salvador-based airline group TACA intend to merge. Under a plan revealed today, the two privately held companies initially will remain separate entities, with Avianca's owner Synergy taking a two-third stake in the new parent company. TACA's shareholders will hold the remaining third. Combined the new entity will operate a fleet of 129 aircraft to more than 100 destinations, and generate annual sales of $3 billion, the carriers' top executives said in a press conference. Roberto Kriete, TACA chairman and CEO, who will serve as chairman of the new company, noted, "Grupo TACA has long been a leading force for consolidation and rationalization in the Latin American airline industry. This latest chapter is a significant milestone in our corporate evolution, giving us the breadth and scale to better compete with any player in our markets while ensuring our long-term success. It represents a unique opportunity for all of our employees and shareholders to form part of one of the leading airline groups in the Americas." Avianca CEO Fabio Villegas, who will be CEO once the merger is concluded, added, "This is a great day in the history of aviation. We are bringing together two of the world's oldest airlines, two institutions with a unique focus on servicing their customers and on the well-being of all their stakeholders, to create an industry leader. I look forward to working with all of our employees as we execute on a vision to build not only the biggest, but the best, airline in the region." Few details are being disclosed, although for now both airlines will continue to operate as separate companies and will maintain their current reporting lines. "Each operating company will remain independent while the new group will leverage best business practices across both organizations," the airlines noted in a release. The deal is subject to regulatory approval. Bank of America, Caoba Capital and Merrill Lynch were TACA's financial advisors, which also used Greenberg Traurig as counsel. Simpson Thacher & Bartlett and Gomez-Pinzon Zuleta acted as counsel to Avianca. Photo credit: TACA http://www.aviationweek.com/aw/gener...n&channel=comm Good luck to the newly formed Avianca-TACA merge; it's just like Air France-KLM. Something tells me the global economy had something to do with this.

[TeeVee]

"Rationalization" of the latin american airline industry?!?!?! more like trying to take over the world and rape it.

TACA and COPA are the two MOST EXPENSIVE airlines in the world, not to mention the fact that their policies are in some ways worse than the worst US airline policies. For example, COPA told me that a ticket I purchased from MGA to CTG was fully refundable. the ticket was purchased 3 months prior to departure. 2 months prior to departure i called to cancel the trip. I was told that I had to cancel in person at the office where i purchased the ticket in MGA. several weeks later i was in MGA, went to the COPA office and was told, sure, you can cancel the ticket but we charge a $125.00 USD "administrative fee"!!! the ticket cost like $300 or so.

next time, i'll fly back to MIA and take AA.

[AA 1818]

Hmm - I wonder how long they have been discussing the issue. The recent c/s change at TACA seems rather Avianca-like compared to their previous schemes. Anyway, good news for both involved. Also, could this shore up support for Avianca joining Star Alliance? I also would love to see where the airlines will reduce services so as not to over-saturate markets and/or run competition against each other.

[Eric Diffoot]

Avianca, TACA Merger To Stimulate Demand


Oct 16, 2009

By Darren Shannon

The parent company to be created under the proposed merger of Avianca and TACA intends to stimulate new demand in Latin America through a revamped schedule, while keeping both brands intact. The benefits of this partnership, therefore, will come from the cost advantages of a large company and increased revenues through improved scheduling, according to the top executives of both carriers. Speaking at ALTA’s Airline Leaders Forum in Cartagena, Colombia, yesterday, Avianca CEO Fabio Villegas and TACA Chairman and CEO Roberto Kriete, along with Avianca’s owner German Efromovich, also noted that the proposed agreement to bring the two airline groups together meets all regulatory requirements, and should easily gain the requisite approvals. “We expect to stimulate the market” through this merger, Kriete told the conference. “We are not going after anyone…We are not going to pick a fight, not with Copa, not with LAN. We can stimulate demand.” That demand will be driven by a revamped schedule that will link both carriers’ networks. “With the same number of airplanes, with the same utilization or even more utilization, we will be able to offer a better service,” said TACA’s chief, noting that a new schedule will not only allow both companies to provide improved connections, it may also provide the opportunity to open new city-pairs. “With this, we can improve revenue substantially,” he added. But increased revenues are only part of the decision to bring Avianca and TACA together. “From a cost view, size does matter,” said Kriete, noting that the negotiating power of a combined airline group will allow them to broker improved deals with suppliers. “Even a 2% improvement in costs would give us $100 million a year. And in this industry that is no small amount,” added Kriete. Despite these changes, the two airlines will remain separate operating entities that could even align with competing alliances: Avianca with SkyTeam and TACA with Star Alliance. “There are several things we can consider,” Kriete said during the panel discussion. Brands will also remain untouched, he continued, adding that “there is value to the individual brands that we do not want to lose.” Eventually, though, a full merger will occur, said Kriete, although it “would be a merger of equals” regardless of Avianca’s larger 67% equity stake in the proposed holding company. The deal as it stands “is a win-win for everyone,” noted Avianca’s Villegas. “We do not see any significant risk with the integration itself,” he added. However, there is an admittance that regulatory issues will have to be resolved, notably over Efromovich’s citizenship (although born in Bolivia he has Brazilian and Colombian citizenship) and conditions of bilateral agreements with the U.S. ] Photo: TACA http://www.aviationweek.com/aw/gener...d&channel=comm Once again, good luck to Avianca-TACA. Two things stood out to me, one being tha,t "We are not going to pick a fight, not with Copa, not with LAN." Oh come on, LAN seems to be doing well, gotta do something against them. Second, one side being apart of OneWorld and the other with SkyTeam, don't think that'll last long.

[Deadstick]

TACA is the only airline I ever flew where I thought they were going to kill me by stupidity. It's a long story, but I'll take a raft over TACA anytime.

[TeeVee]

TACA sux, period. I was flying from BZE to MGA through El Salvador, their hub. we had a 45 minute layover, so we grabbed some pupusas and a few beers in the terminal. about 25 minutes before our scheduled departure, ou bartender says "hey, aren't you going to MGA?" better hurry, they just called final boarding for your flight.

we dropped some cash on the bar and hauled butt to the gate. boarding doors were closed, and the jerks were gonna leave without us 25 minutes BEFORE scheduled departure. after much arguing we were allowed to board.

will never fly them again.

and don't believe the hype, the merger will absolutely result in higher fares on two airlines that are not known for cheap fares to begin with. sure their costs may go down, but in typical corporate fashion, no savings will be passed along.