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Oversubscribed Avianca-TACA IPO provides another indicator of buoyant Latin American industry


Preliminary results from Avianca-TACA’s initial public offering (IPO) show a strong appetite for Latin American airline stocks. The offer period for Avianca-TACA shares expired on 15-Apr-2011 with a healthy five to one oversubscription ratio.

Once Avianca-TACA formally commences trading on the Colombian Stock Exchange, all six of Latin America’s top airline groups will be publicly traded. Avianca-TACA follows Aeromexico, which began trading in the Mexican stock exchange on 14 April-2011. Copa, Gol, LAN and TAM all have been successfully trading for several years on the New York Stock Exchange, which could later host second listings for Aeromexico and Avianca-TACA.

Top 6 Latin American airline groups by revenue















Operating profit







Net profit







All six airline groups were profitable in 2010, with Copa and LAN again posting some of the highest airline profit margins in the world. As a group, these carriers helped Latin America outperform nearly every other region in 2010. Latin America is expected to again outperform other regions in 2011 as more profits are expected for all six leading groups despite the rise in oil prices.

See related report: FACT FILE: Latin American aviation. 2011 will be crucial year for global alliances

Shares of Avianca-TACA will start trading on 11-May-2011 at COP5000 (USD2.78) each. With 100 million shares being floated, the airline group stands to raise COP500 billion (USD278 million), which will be used to fund fleet and network expansion. Avianca-TACA already has industry-leading market shares in Colombia and a handful of Central American countries as well as subsidiaries in several other key Latin American markets including Brazil, Ecuador and Peru. It is the fourth largest and until now the largest privately held airline group in the region, consisting of 13 carriers from ten countries generating over USD3 billion per year in revenues.

Airlines included in Avianca-TACA

Carrier Country

Number of
aircraft in service

Avianca Colombia 56
TACA International El Salvador 34
AeroGal Ecuador 18
Avianca Brazil Brazil 17
Sansa* Costa Rica 13
La Costeña* Nicaragua 7
Aeroperlas* Panama 6
TACA Peru Peru 5
Aviateca* Guatemala 4
Tampa Cargo Colombia 4
Isleña* Hondurus 3
VIP^ Ecuador 3
Lacsa Costa Rica 2
Total   172

Avianca-TACA during the offer period, which began on 28-Mar-2011, received enough requests to sell over 500 million shares and raise more than USD2.5 billion. The company says the process of validating these requests will begin on 18-Apr-2011 and the formal allocation of shares will be made from 29-Apr-2011 to 05-May-2011.

During the allocation phase, Avianca-TACA says priority will be given to its employees and members of its loyalty programme for amounts of up to USD8,000. With smaller shareholders being favoured, the airline group expects it will end up with more than 50,000 owners. Avianca-TACA claims this is the first airline IPO in which share allocation priority has been given to frequent flyers.

Avianca and TACA are planning to combine their frequent flyer programmes this year as part of the next phase in exploiting merger synergies. As of the end of 2010, the merger had generated USD54 million in synergies. By 2012, 75% of the projected USD200 million in synergies are expected to be realised.

Avianca and TACA completed their merger at the end of Jan-2010. The new entity had a successful first year despite challenging market conditions in its largest single market, Colombia. During 2010, the airline group was also accepted by Star Alliance, which it plans to formally join in 2Q2012.

Newly released audited results for the 11 months of 2010 that Avianca-TACA operated as a merged entity show an operating profit of COP5.3 billion (USD3 million). The net profit during this period was COP110billion (USD61 million) or COP190billion (USD106 million) when excluding COP90 billion in non-recurring accounting adjustments.

Earlier Avianca-TACA announced the group’s subsidiaries turned a combined EBITDA operating profit of USD409 million for the full year 2010. Net income was USD50 million, including a USD58 million provision related to the retirement of Avianca’s Fokker 100 fleet, which are now in the process of being replaced with A318s.

The proceeds from the IPO will help fund further expansion of the group’s A320 family fleet. The A320 is already the backbone of the group’s fleet, accounting for almost two-thirds of all Avianca-TACA jet aircraft. Two of the group’s subsidiaries, Avianca Brazil and Ecuador’s AeroGal, became new A320 operators in 2010. The group has about 40 additional A320s on order, according to Ascend data, and is considered a potential early customer for the A320neo.

Widebodies are currently only operated by the Avianca unit out of the Bogota hub. But the group has been looking at potentially opening long-haul routes from Central America and Brazil. Avianca currently only operates eight widebodies – six A330s and two B767s, according to Ascend data – but the group has ordered both the B787 and A350.

Avianca-TACA’s network is now primarily focused on the Americas, with service outside the continent limited to Madrid and Barcelona in Spain. In addition to possible long-haul routes from Sao Paulo, San Salvador or San Jose in Costa Rica, London and Frankfurt are considered likely new routes from Bogota.

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