Gol and Avianca unite and aim to create the leading aviation group in Latin America

RIO DE JANEIRO, BRAZIL – The controllers of Brazil’s Gol and the largest shareholders of Colombia’s Avianca signed the first step to creating the largest transport group in Latin America last night.

After years of talks, the Constantino family, which owns the Brazilian company, and Avianca’s main partners agreed to transfer their stakes in the airlines to a new holding company called Abra Group, which will assume the role of controller of the companies and be based in the United Kingdom.

Once the necessary regulatory approvals have been obtained, the Abra Group will be launched. The sum of the directly or indirectly housed brands represents annual sales of approximately US$7 billion and has a fleet of 300 aircraft.

The group is receiving US$350 million in capitalization in the form of new funds from several investors, with Elliott International, Kingsland and South Lake standing out. These funds became Avianca shareholders after the company’s debt restructuring.

Abra will control Gol and Avianca and hold a minority stake in Viva (Colombia and Peru), but with 100% economic interest, as well as an investment in convertible bonds equivalent to a minority stake in Chile’s Sky Airline.

Less than a month ago, Sky’s CEO Holger Paulmann was already speaking openly about a merger with Avianca. The group will also include the Smiles and LifeMiles loyalty programs.

From the beginning, the plan aims to create a more stable environment for the development and growth of each controlled company – a kind of parent company that will take care of the development of the operating companies by efficiently and jointly managing the infrastructure of all of them.

The goal is to have the largest network of complementary routes in the region, with minimal overlap in the markets and a focus on low-cost operations.

The reading is that none of them can actually be a “low-cost” activity for users, as Gol was when it first entered the market, given the instabilities currently affecting the business environment on the various fronts.

The airlines will continue their activities independently and with their brands, as they do today – and still with their own leaderships. The difference is in the new organization of control. But there are no considerations for the market players at the moment either.

The group’s estimated potential for the next few years is US$10 billion in revenue, with the potential to add 500 aircraft to its fleet.

The family that controls Gol will be the largest shareholder of Abra in the original structure, with about 30%. Constantino de Oliveira Junior will be the head of the new holding company.

“With this agreement, the Abra Group airlines occupy a leading position in air transport in Latin America. They serve a population of more than one billion people and a GDP of nearly US$3 trillion, and offer significant opportunities for capacity and revenue growth. The unified corporate structure will allow each airline to deliver results while maintaining independent brands, teams and cultures, and provide employees with more personal and professional growth opportunities at all stages of their careers,” Junior said in a statement about the acquisition.

Despite the greater involvement of the Gol-owning family, the group will be governed by a shareholders’ agreement, on a co-control basis with Avianca’s main partners. As Abra’s chairman,  Roberto Kriete, co-founder and a key figure in the Colombian company, will take over.

“Our vision is to create an air transport group that meets the challenges of the 21st century and improves air travel for our customers, employees and partners, as well as for the communities in which we operate,” Kriete said in the statement.

Adrian Neuhauser, current president and CEO of Avianca, and Richard Lark, current CFO of Gol, will become co-chairs of the group and retain their current roles at the airlines.

The managers will be dedicated to achieving “synergies to ensure a lower unit cost structure in their respective operating markets, route expansion, service product offerings, and loyalty programs,” the companies said.

Cargo should also receive attention, as it represents a growth front in air transportation in Latin America and other regions. Recently, Gol and Mercado livre announced a 10-year agreement that is expected to generate R$1 billion in revenue for the Brazilian carrier over five years.

The goal is for the group to lead the sector’s ESG transformation in the markets in which it operates by investing in a fleet with a lower carbon footprint that can “significantly accelerate the path to achieving carbon neutrality targets.