Is Avianca Holdings SA (ADR) (NYSE:AVH) For Sale?


Avianca Holdings SA (ADR) (NYSE: AVH) is said to be seeking $500 million additional capital, but the deal could pave way for a full sale of the airline carrier. In what might continue the recent wave of industry consolidation, Delta Air Lines, Inc. (NYSE: DAL) and United Continental Holdings Inc (NYSE: UAL) are said to be among the potential buyers circling Avianca.

U.S. airlines have recently demonstrated a strong appetite for international expansion. That explains why the mention of Delta and United Continental in connection with Avianca buyout doesn’t come as a major surprise. Fierce competition is another reason fueling consolidation in the airline industry.

Industry consolidation

Since 2008, eight U.S. airlines have merged to create four airlines that control over 80% of the market. Airline mergers in the recent years have been notably common in the U.S., Latin America and Europe.

A deal not guaranteed

Although people familiar with the matter say that Avianca Holdings SA (ADR) (NYSE:AVH) has reached out to potential bidders with documents seeking $500 million capital injection, there is no guarantee a deal will be reached. The additional capital hunt by Avianca is said to be in the early stages.

United and Delta trying to catch up

The acquisition of Avianca could provide an opportunity for Delta and UAL to catch up with American Airlines Group Inc (OTCMKTS: AAMRQ) in the Latin America route. Thanks to its relationship with Latam Airlines Group SA, American Airlines currently leads its U.S. peers as leading provider of airline travel services in the Latin America region.

Given its position as the second-largest carrier in South America after Latam, Avianca Holdings SA (ADR) (NYSE: AVH) could be an exciting asset for Delta and United Continental.

Avianca serves over 100 destinations across 26 countries and its fleet consists of 176 airplanes. The carrier has hubs in Lima, Peru, Bogotá, Colombia and San Salvador, El Salvador.

What can Avianca Holdings SA (ADR) (NYSE:AVH) bring to the table?

Besides the expanded network, the buyer of Latam, Avianca Holdings SA (ADR) (NYSE:AVH) will also benefit from immediate topline boost. The carrier generated revenue of $4.7 billion in 2014 and its profit for that period was $120 million. Avianca had debt of $3.3 billion as of September 2015.


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