South American Airlines Readjust Post-Avianca

 - August 27, 2019, 8:05 AM

The exit of Brazil’s Avianca and the redistribution of its most valuable asset, landing rights at São Paulo’s Congonhas Airport that allow participation in the extremely lucrative São Paulo-Rio de Janeiro shuttle, has provoked a flurry of changes in the market, with more to come. Civil aviation agency ANAC redistributed Avianca’s Congonhas slots to number-three carrier Azul and regional airlines MAP, which operates ATRs in the Amazon, and Passaredo based in upstate São Paulo and serving mostly smaller cities with ATR-500s. On August 21, barely three weeks after the slot distribution, Passaredo announced it had purchased 100 percent of MAP, creating a fleet of 10 ATRs with three more soon to arrive, and that it would use the Congonhas slots, and new state government incentives, to increase flights to regional markets.

The Congonhas slots, which no doubt vastly increased MAP’s allure as a target of acquisition, may do the same for Passaredo. In May, Brazil’s Congress validated a presidential decree permitting airlines with 100 percent foreign ownership to operate domestically. On May 22 ANAC approved the request of Globalia Linhas Aéreas, which owns Spanish airline Air Europa, to operate domestic services in Brazil; it already flies from Madrid to São Paulo, Salvador, and Recife. A previous sale of Passaredo in 2017 was signed but rescinded, a sign that a future sale isn’t impossible.

Brazil’s number-three carrier, Azul, had offered $106 million for part of Avianca including the Congonhas slots, where it had long sought to increase its share. After “duopoly” carriers LATAM and Gol blocked the Azul purchase with a counteroffer, time ran out for Avianca.

The shell of Brazil’s Avianca on September 1 formally left the Star Alliance, which is now without a member in Brazil, leaving room for another realignment. Colombia’s Avianca remains a Star Alliance member, though it has discontinued all of its flights to Bolivia, part of a move to stem losses that reached $475 million in the first half of 2019 and led to a change in control.

Azul, Avianca’s suitor left at the altar, meanwhile continued its aggressive advertising labeling itself as “the largest airline in Brazil in number of flights and cities served,” and its passenger share jumped 28.8 percent following Avianca’s market exit, reaching 25.4 percent in June. Its most recent move is to become the first Brazilian airline certified by the U.S. TSA PreCheck program.

An appeals court is expected on Tuesday to legally ratify the practical situation and move Avianca from bankruptcy protection to liquidation.