Thursday , January 21 2021

Bankruptcy of Avianca Brazil will leave a free path to Latam




Avianca Brasil was a pledge that businessman Germán Efromovich, a Colombian of Bolivian origin and nationalized Brazilian, began to turn the Colombian flag carrier into a regional player at the height of Latam Airlines.

Efromovich, through its participation in the Syngery Group, acquired OceanAir in 2009, a company that has begun to offer oil service services to the oil sector and ultimately has become the fourth player in this industry in Brazil.

Then the company starts to deal with Brazil and now has 55 aircrafts, 26 domestic destinations in the country, 4 outside Brazil and more than 290 flights each day. Efromovich, in turn, is an indirect administrator of Colombia-based Avianca Holdings, which controls operations in Ecuador, El Salvador and Peru. Strictly speaking, Avianca Holdings and Avianca Brasil are not part of the same group but share their main shareholder and are also in the process of merger.

All this was put in jeopardy yesterday after Aviant Brazil adopted the bankruptcy protection figure, a situation that would force the company to cancel flights between Dec. 10 and Dec. 31, affecting about 77,000 passengers due to the threat of removing 14 aircraft, according to documents reported by Reuters.

The measure aims to reduce the risk of losing a significant proportion of its fleet, close to 20%, due to court conflicts with airplane owners. "This is a measure of protection to save time," says aviation expert Ricardo Delpiano.

The Big Winner

And although the dream of turning Aviana into a regional player is not totally rejected – it remains to be seen whether success in Brazil is successful – Latam has emerged as a great winner. This, largely because it will remain as the only player with a regional vocation, a situation that is well read by the market. Indeed, yesterday, local stock rose 4.74% to 1.28% today. However, a 20.28% decline has taken place over the year. However, its price is close to $ 7,000 per paper and exceeds the price at which Qatar Airways has become the property of the group, which now owns 10% of Latham's ownership.

But another important point is that a possible reduction in Avianca Brasil's operations – a company that has 12% of the Brazilian market – opens up options for its competitors: Azul, Gol and Latam are gaining more weight.

"It will all depend on how Avianca Brasil develops, whether it is reducing its fleet or not, and if this happens, it is very possible, because they will have to freeze, yes, the opportunities for competition, Blue, Gol and Latam. international routes such as Miami, Santiago and New York, and is best placed to take advantage of this opportunity, which is why markets have responded favorably, "Delpiano adds.

Merging

The history of the two companies and their arrival in Brazil go hand in hand. One year after the establishment of Avianca Brasil in 2010, the then LAN Airlines materialized its merger with TAM, the largest aviation operator in Brazil owned by the Amaro family. The association allowed the national group to enter the largest regional market, adding these operations to those already in Ecuador, Argentina, Peru and Colombia. Then one of the historical longings of its owners materialized: to become a regional operator.

But the bet was not going well. As soon as the merger took place in 2012, Brazil has begun to show signs of a serious economic, social and institutional crisis that has been a brewery and from which it can not yet escape. To this was added that the merger was not easy given the size of TAM – Brazil is the largest market in the region – the challenge to integrate these operations and to include LAN printing in its operations was extremely complex.

"Just as we see great growth opportunities, we are also aware that the fusion processes are not easy, but we know that there are many challenges and we are learning to stand up, especially in this sense, our organizational challenge. the association of LAN and TAM includes a team, "said Latam Airlines President Mauricio Amaro at that time.

Meanwhile, other rivals grew, but several also encountered serious difficulties. This is the case, for example, of the TACA, which opened its subsidiary in Peru or COPA, which entered Colombia and also tried to become a regional competitor. By contrast, the Brazilian GOL was affected by the crisis in this country – this year has begun to recover – and Aerolineas Argentinas, once restarted, has only generated costs for the Argentine government for many years.

But in parallel, another phenomenon began to emerge: the low price. The first to adopt this model was SKY Airline, a Polish-related company that also aims to become a regional player. Latam is adapting to this, also changing its ticket sales model, changing the structure of its tariffs, and adding trunks for the suitcases at the cheapest. Yet, as Latam insists that they are not and will not be "low cost".


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