Avianca suspends merger plans with Avianca Brazil

Aviation

Bogota-based Avianca says it has suspended plans to merge with sister carrier Avianca Brazil, two months after the Sao Paulo-based carrier filed for bankruptcy protection.

Avianca says the due diligence process to study a merger of the two airlines has been “suspended for a substantial amount of time and will remain postponed indefinitely”.

Avianca’s majority shareholder Synergy Aerospace is the owner of Avianca Brazil, but the two airlines are managed separately. Avianca Brazil shares the Colombian airline’s name through a licensing agreement signed in 2008, said Avianca chief executive Hernan Rincon on an earnings call today.

The similar names have often resulted in confusion and in recent months, a negative impact on Avianca’s stock price after its privately-owned Brazilian namesake filed for bankruptcy protection in December 2018 as it was faced with aircraft repossession threats from lessors.

Synergy had announced plans in early 2017 to integrate Avianca with Avianca Brazil – a plan that was opposed by Avianca’s second largest shareholder Kingsland Holdings which said the move will be detrimental to Avianca due to Avianca Brazil’s shaky finances.

In the third quarter of 2018, Avianca Brazil reported a net loss of R188 million ($50.3 million), according to financial results filed with Brazil’s civil aviation authority ANAC. The airline reported a net loss of R464 million in the first nine months of 2018.

In 2017, the airline reported a net profit of R41.6 million. It posted a net loss of R71.4 million in 2016, according to financial documents filed with ANAC.