Avianca & GOL To Merge, Form Mega Airline Group

Major airline consolidation is coming to Latin America.

Abra Group to own Avianca & GOL

Two of Latin America's biggest airlines, GOL and Avianca, have signed an agreement to create a leading air transportation group across Latin America. Just a few days ago, Avianca announced plans to acquire low cost carrier Viva Air, so the Abra Group will also own that airline.

The details of the merger are not known.

• 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

To achieve greater economies of scale, the goal is for GOL and Avianca to have the lowest unit costs in their respective markets. The principal shareholders of Avianca and the majority shareholders of GOL will control the group.

Roberto Kriete is the Chairman of the Abra Group.

“Our vision is to create an airline group that tackles 21^st 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.”

The CEO of the group 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 subject to regulatory approval, so I am curious to see how that goes. I think 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

There are a few thoughts on a potential GOL merger.

• 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 a lot of questions and not many answers.

Bottom line

A new parent company will be created with the merger of Avianca and GOL. The two airlines will retain their own branding, but will benefit from other synergies.

It is not yet known if regulators will approve the deal, and what it will mean for partnerships, alliances, and business models. There are some differences.

What do you think about GOL joining forces with Avianca?