(Bloomberg) -- Avianca Holdings SA and United Continental Holdings Inc. are nearing a joint-venture agreement in which no money will change hands, said Jose Efromovich, an Avianca board member whose brother German is chairman.
A transaction would cap a year of talks between the companies about forging a closer relationship. A joint venture arrangement would enable the carriers to share profits and coordinate fares and schedules, if approved by regulators.
“We underestimated the timeline,” Jose Efromovich said in an interview in Sao Paulo last week. Avianca already shares membership with United in the global Star Alliance group of airlines.
A major obstacle was removed in November when Avianca and its No. 2 shareholder, Kingsland Holdings, agreed to end dueling lawsuits. Kingsland had sued the airline, United and the Efromovich brothers, saying they secretly negotiated an $800 million loan and strategic partnership. Part of the proceeds would have gone to repay loans from New York hedge fund Elliott Management Corp., Kingsland said.
The pact now under discussion doesn’t involve a cash infusion for Avianca, Jose Efromovich said.
“United’s not putting a cent into Avianca Holdings,” he said. Neither is Elliott, he said. United declined to comment. Elliott didn’t return a request for comment.
Separately, United more than doubled its stake in Azul SA, a Brazilian airline, to 8 percent, according to a regulatory filing Friday.
Azul’s local rivals include Avianca Brasil, which is trying to work out a merger with Avianca Holdings, one that has no fixed deadline, said Efromovich, who controls the closely-held Brazilian carrier. Doing that deal depends on Avianca Brasil reporting a profit, he said. The company’s 2017 results are being audited before being submitted to Brazil’s aviation regulator soon.
“Last year definitely would have been positive if we hadn’t invested in international flights,” he said. “Worst case scenario, we come in just a bit under break even.”
While Avianca Brasil doesn’t have any immediate plans to go public, the idea’s not off the table. Brazil’s market for initial public offerings is finally heating up, with three deals happening last week alone.
“We’re approached all the time about a potential listing or bond sale,” Efromovich said. “We’re holding out so far.”
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