Avianca-TACA combine to increase clout in Latin America. Avianca SWOT Analysis
Synergy Group, the parent of Colombia's Avianca, and leading Central American airline, Grupo Taca Holdings Ltd (owned by Kingsland Holding Ltd), have reached an agreement to inject their respective shareholdings in Avianca and TACA into a newly formed holding company, with the aim of creating Latin America's leading aviation group. The transaction is subject to regulatory and other antitrust approvals.
- Synergy Group and Grupo Taca Holdings have agreed to merge their respective shareholdings in Avianca and TACA to create Latin America's leading aviation group.
- Avianca and TACA have a combined annual revenue of nearly USD3 billion and serve over 100 destinations worldwide.
- The two airlines will continue to operate separately but coordinate operations to provide seamless services to passengers.
- Avianca CEO, Fabio Villegas, will serve as CEO of the new group, while Roberto Kriete, Chairman and CEO of TACA, will serve as Chairman.
- The merger aims to strengthen the airlines' position in the market and compete with other major players in the region.
- Avianca faces challenges such as the suitability of its airline model for low-income populations and competition in core markets.
One group, two airlines
Avianca and TACA have nearly USD3 billion in aggregate annual revenues, or around 70% of the size of Latin America's biggest carrier (by market value), Lan Chile, which reported 2008 revenue of USD4.28 billion.
Avianca and TACA serve more than 100 destinations worldwide (including 75 cities in Latin America - which they claim is the largest network in the region), operate a fleet of 129 aircraft with four hubs (Bogota, Lima, San Salvador and San Jose), employ approximately 12,000 people, and have over 3 million frequent-flyer members.
The two airlines will continue to operate as separate companies, maintaining the same reporting lines within each organisation, "thereby building on the strengths of their respective brands, hubs and networks", while coordinating operations to "provide seamless services to their passengers throughout the combined network".
Following the transaction, both sets of shareholders will share in the governance of the newly created group. Avianca CEO, Fabio Villegas, will serve as CEO of the future group, while Roberto Kriete, Chairman and CEO of TACA, will serve as Chairman. TACA COO Estuardo Ortiz will become the Chief Operating Officer and Avianca CFO, Gerardo Grajales, will become the Chief Financial Officer of the group.
Mr Kriete stated, "Grupo TACA has long been a leading force for consolidation and rationalization in the Latin American airline industry. This latest chapter is a significant milestone in our corporate evolution, giving us the breadth and scale to better compete with any player in our markets while ensuring our long-term success. It represents a unique opportunity for all of our employees and shareholders to form part of one of the leading airline groups in the Americas."
Germán Efromovich, Chairman of the Synergy Group, stated, "we are proud of what Avianca has achieved over the past few years in terms of the strong corporate culture we have developed and the quality of service we are providing. With this formidable partnership we will be able to build further on that success and provide our passengers access to what is now Latin America's leading airline network, as well as creating opportunities for further growth and development for all our employees."
Strengths, Weaknesses, Opportunities and Threats?
A recent SWOT analysis published by The Centre noted that while Avianca enjoys solid recent traffic growth and excellent backing, it questioned whether Avianca has the right airline model for a low-income populace, while it trails LAN and Copa in establishing an integrated regional air network - a factor it is seeking to address with the TACA merger. Synergy Aerospace also has very aggressive fleet expansion plans requiring extensive financing, faces a crowded Brazilian market and rising competition in core European and US markets (particularly from US LCCs), according to the analysis.
Read the full Avianca SWOT analysis.