Business
United Airlines is expanding its reach into Brazil. United Airlines has agreed to pay $100 million for a 5 percent stake in Azul SA, Brazil's third-biggest airline, as it attempts to catch up with U.S. rivals with more established ties in South America's biggest air travel market, reports Reuters. Azul's founder and chief executive, David Neeleman, who also founded JetBlue Airways Corp (JBLU.O), announced the deal on Friday. The division of United Continental Holdings Inc (UAL.N) will name a representative to Azul's board and the two airlines have struck a codesharing agreement. The investment should ease the urgency of an initial public offering by Azul, which has failed at several attempts to list since 2012 as Brazil's slumping economy unnerved investors.
Neeleman, who also acquired a 61 percent stake in Portuguese carrier TAP [TAPA.UL] this month, said Azul still planned to list shares "when the outlook improves." The United investment will be made in the form of a capital injection, slightly diluting the stakes of Neeleman and Azul's existing shareholders. The partnership follows big strides in Brazil by United's main rivals. Delta Air Lines Inc (DAL.N) bought a 3 percent stake in Brazil's No.2 airline Gol Linhas Aereas Inteligentes SA (GOLL4.SA) for $100 million in 2011, when the Brazilian currency was 40 percent stronger.
The deal will give United a seat on the board of the discount carrier, which serves the most destinations in the country—105—and operates more than 900 daily flights, notes the Wall Street Journal. The company carried 21 million passengers last year and has a fleet of 145 aircraft. The agreement also paves the way for an enhanced code-share agreement, subject to government approvals, expanding connecting opportunities between North and South American cities and joint loyalty-program participation.
Azul, which has its main base in Campinas, about 50 minutes from downtown São Paulo, got a boost in 2012 when it acquired another Brazilian discounter, Trip. Azul also operates more than 50 daily flights from São Paulo’s Guarulhos International Airport, an airport United serves from the U.S. With government approval, Azul plans to place its code on United flights throughout North America and the Caribbean. “Brazilians will have access to destinations in United’s world-wide route network, Mr. Neeleman said, “while U.S. customers will be able to fly conveniently to famous destinations in Brazil, such as Belo Horizone, Iguazu Falls and the Amazon.”
