Airlines consolidate and relaunch to reshape Latin America’s skies

Latin American aviation is charting a course back to health despite receiving no direct government help in the Covid-19 crisis, with a battle for the skies heating up through mergers and expansion plans. On the brink of collapse when flights were grounded during the pandemic, three of the region’s largest airlines — Chile’s Latam, Avianca of Colombia and Aeroméxico — all exited US bankruptcy protection over the past 18 months. Others such as Brazilian carriers Gol and Azul have struck deals with creditors to reduce debts and financial obligations to more manageable levels.  As passenger numbers bounce back, growth is once again in focus. The sector’s dominant players have embarked on corporate combinations and launched new routes, with investors pumping in billions of dollars to aid the recovery. This spirit is embodied by the newly created Abra Group, a pan-Latin holding company bringing together Avianca and Gol under common ownership. It will challenge Latam, the regional market leader by fleet size and itself the result of a merger over a decade ago. While the two brands are to remain independent with separate managements, Abra says it will lead to cost savings and greater economies of scale, at the same time increasing revenues and investments. “You’ve seen consolidation in the US and Europe. Players like Lufthansa and Air France-KLM really now dominate the region, with low-cost rivals keeping them honest,” said Adrian Neuhauser, Avianca’s CE. “You’ve got very little of the old, one-market airline. And we think the same is starting to happen in Latin America.”  Abra’s ambitions suffered a setback last month, however, when Avianca abandoned an acquisition of stricken fellow Colombian carrier Viva Air. It blamed conditions imposed by regulators as unworkable.  Even so, analysts say there is logic to such business tie-ups, given the scope for greater bargaining power on fuel and aircraft purchases. <br/>