2020 Launch Expected for United-Avianca-Copa Deal

 - December 3, 2018, 10:47 AM

The joint business agreement (JBA) signed by Avianca, Copa Holdings, and United Airlines on November 30 and covering services on Latin America-U.S. routes will likely take effect in the latter half of 2020, according to Copa Holdings CEO Pedro Heilbron.

Speaking to financial analysts during Copa Holdings’ third-quarter financial results conference call, which took place before the three Star Alliance carriers signed the JBA, Heilbron predicted the companies would sign the deal this year but “take at least one-and-a-half years to get it approved” by relevant regulatory authorities in the U.S., Colombia, and Panama. It “will at best enter into effect towards the end of 2020,” he said.

The planned JBA would see Avianca, Copa, and United integrate their complementary Latin America-U.S. networks into a collaborative revenue-sharing joint business, which, assuming they receive the required regulatory approvals, would allow them to serve customers as if they operated as a single airline. United, Copa, and Avianca expect the JBA to allow them to align their frequent-flier programs, coordinate their flight schedules, and improve the overall travel experience for customers, according to the three Star members.

Covering more than 12,000 city-pairs in the Latin America-U.S. market, the JBA would drive traffic growth at major gateway cities throughout Latin America, the carriers said in announcing the signing of the JBA. The JBA would provide “competitive fares and a superior network of more than 275 destinations throughout Latin America and the U.S. and also promotes tourism and investment in our region,” according to Heilbron.

The JBA document signed last Friday excludes Brazil from the list of Latin American nations on routes on which the three airlines would cooperate. However, the carriers’ joint news release noted that because the U.S. and Brazil have recently signed an Open Skies bilateral air service agreement, Avianca, Copa, and United—all of which extensively serve Brazil—“are exploring the possibility of adding Brazil to the JBA.”

In that context, the recent agreement between Copa Airlines and Brazil’s Azul Linhas Aéreas—in which United Airlines has held a $100 million stake since June 2015—to codeshare on Brazilian domestic routes could prove strategically important for the prospective JBA. Its new codeshare with Azul allows Copa Airlines to “improve connectivity within Brazil and strengthen our Brazil network,” Heilbron said in Copa’s third-quarter earnings call. “There’s always an upside [to such codeshare agreements],” he added. “There is really no downside, especially in a vast network in a country that’s so important for us.”

United Airlines also codeshares with Azul, which is not a Star member. Synergy Group, which owns Avianca’s parent Avianca Holdings, also owns Star affiliate Avianca Brasil and reportedly aims to merge the two carriers.