December 3, 2018 / 4:43 PM / 7 days ago

Brazil's Azul could join Avianca-United Airlines alliance

SAO PAULO, Dec 3 (Reuters) - Two Brazilian airlines, Azul SA and Avianca Brasil, are targets for expansion in the wide-ranging alliance between United Continental Holdings Inc , Colombia’s Avianca Holdings and Panama’s Copa Airlines on U.S.-Latin America routes, Avianca Holdings’ Chief Financial Officer, Gerardo Grajales, told Reuters on Monday.

There was little reference to Brazil, by far the region’s largest market, when the alliance was announced on Friday, but Grajales said the parties to the agreement already had in mind Azul and Avianca Brasil, which operates independently of Colombia-based Avianca Holdings.

“The two airlines complement each other in the Brazilian market,” Grajales said. “From the beginning we thought that Brazil should be covered by our agreement, however, no partnership would be authorized if it did not have an Open Skies agreement.”

The Open Skies agreement between Brazil and the United States was signed into law in May, when discussions among the three airlines were already advanced, he explained.

The airline agreement mimics a partnership between American Airlines and Chile’s Latam Airlines which has been mired in regulatory scrutiny.

The announcement between the United Airlines parent, Avianca and Copa capped off almost two years of negotiations. United will loan Avianca’s majority shareholder almost $500 million to be spent on ventures outside of the airline.

Depending on how it is repaid, United could end up owning a large chunk of the Colombian carrier. United is making no monetary investment in Copa or its affiliates.

United already owns an 8 percent stake in Azul, and has a codesharing agreement with Avianca Brasil, formerly known as Ocean Air.

Shares in Azul were down almost 5 percent on Monday afternoon in Sao Paulo. The world’s largest asset manager BlackRock disclosed late on Friday that it had sold an almost 10 percent stake in Azul’s preferred shares. Hours earlier, the carrier disclosed in another securities filing that it sought to double in size in the next five years.

Azul did not immediately respond to a request for comment. (Reporting by Marcelo Rochabrun; Editing by David Gregorio)

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