Avianca and United Airlines are planning a joint venture with a proposed 10-year term, which is expected to contribute hundreds of millions of dollars in synergies.
The proposed partnership will also include Avianca's sister carrier, Avianca Brazil, Avianca chief executive Hernan Rincon tells FlightGlobal.
Avianca's board will likely vote on the proposed joint venture in about eight to 10 weeks, he says on the sidelines of the IATA annual general meeting in Cancun.
The two carriers announced in February that they will form a strategic partnership, but have revealed few details since then.
"The negotiations [with United] are going well," says Rincon. "We are about 35% done, and we have nine meetings scheduled for the following weeks."
Rincon met with United chief executive Oscar Munoz at the IATA AGM on 5 June, and with United president Scott Kirby in Frankfurt two weeks ago. Both airlines are members of the Star Alliance.
"It will be about eight to 10 weeks until we finish and we have an agreement that needs to be approved," says Rincon.
The proposed joint venture will cover United and Avianca's routes between the USA and Latin America, allowing the two carriers to coordinate schedules and feed each other's networks. For example, a passenger travelling to Latin America from the USA on a United flight will easily connect onto a domestic Avianca flight, says Rincon.
Regulatory approvals of the joint venture could take six to nine months, although he acknowledges that it could be longer than that. A joint venture between Delta Air Lines and Aeromexico, which went into force last month, waited for almost two years for US regulatory approval.
"The longest process will be in the US because of how busy and rigorous the process is," says Rincon. The joint venture will also require approvals from the several countries that Avianca operates domestic subsidiaries in.
"We are looking at hundreds of millions of dollars in synergies," he says, declining to be more specific on the amount.
Avianca and United plan to propose a 10-year term for the joint venture, says Rincon. US regulators imposed a five-year term on Delta and Aeromexico's joint venture, after other airlines raised competition concerns.
Rincon says the two carriers are open to other concessions if needed to secure regulatory approval.
There are no plans for United to acquire a stake in Avianca, or join the airline's board, he says. A United spokesperson says: "We look forward to further developing our strategic partnerships in Latin America, but we don’t have any details to announce at this time."
Rincon downplays concerns that the planned joint venture would be hindered by a lawsuit brought against Avianca by its biggest minority shareholder Kingsland Holdings, which wants to stop the deal with United.
"It's a groundless, meritless suit," says Rincon, caling the legal action a "waste of our time". Kingsland, however, has indicated that it is not backing down.
A Kingsland spokesperson says a United deal "will be subject to scrutiny by the court and public if a definitive agreement is announced".
A planned joint venture between Avianca and United is in line with comments made by United's Kirby in April, who said that the Chicago-based carrier wants to form joint ventures with partners Avianca, Azul and Copa Airlines.
Copa is also a Star Alliance member, and has a long-standing relationship with United. Asked if Copa could join the partnership between United and Avianca, Rincon says Avianca is open to it but has not held discussions with Copa.
Copa chief executive Pedro Heilbron declines to comment when contacted. He told FlightGlobal on 5 June that Copa is definitely interested in a potential joint venture with United.
"We have a great partnership with United," says Heilbron. "It's as strong as it's ever been."
Copa and United renewed their long-term alliance for at least five years in May 2016, continuing years of codesharing, frequent flyer benefits reciprocity and other co-operation efforts.
Story updated with United statement
Source: Cirium Dashboard
