United Airlines Enacts Leadership Challenge At Avianca

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The tumult at Avianca continues. Now, United Airlines is engaged in a leadership battle for the beleaguered airline. This comes after Hernan Rincon, the former CEO of Avianca, resigned back in April.

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Avianca’s seen some rough times recently. Photo: Star Alliance

United’s intervention

United and Avianca are Star Alliance partners. In the last few years, United has sought closer ties with the Colombian airline. As a result, back in 2018, United, Avianca, and Copa Airlines announced a three-way joint venture. Part of that agreement came with a loan to Synergy Group.

Copa Airlines 737 MAX
Copa Airlines was a member of the three-way joint venture with Avianca and United. Photo: Copa Airlines

The loan

United loaned $456 million to Synergy Group in 2018. Not even one year later, Synergy couldn’t meet some conditions of the loan. Thus, the future of Avianca came into uncertainty as United could force a takeover of the airline.

However, it seems unlikely that United really want to acquire Avianca. Some of Avianca’s reputation has been damaged amid Avianca Brazil’s regulatory suspension. Not to mention, as Reuters reported, United has a little problem back home due to contracts that don’t allow United to take majority ownership of another carrier.

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There was a possibility of United Airlines acquiring Avianca. Photo: United

United meddles in Avianca management

Instead, United proceeded to make some leadership changes at Avianca. The chairman of the board, Germán Efromovich, was ousted and replaced. Robert Kriete is the new chairman. Kriete has a history with Latin American airlines, as former CEO of TACA, which merged with Avianca in 2010. Now, Kriete is the owner of Avianca’s second-largest shareholder.

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Avianca replaced their chairman of the board. Photo: Oliver Holzbauer/Wikimedia Commons

What’s next?

United won’t let this go. For one, they’ve pledged upwards of an additional $150 million in a loan to Avianca’s parent company. Beyond that, United desperately wants a South American joint venture. In United’s announcement of the joint venture, they highlighted 12,000 new city pairs (including connections), closer partnership with frequent flier programs, flight schedule coordination, and better airport facilities.

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While Copa Airlines has a significant presence running niche operations, Avianca offers better regional connection throughout Latin America. For example, there is Cuzco in Peru. Cuzco is one of the easiest points of access for visiting Machu Picchu. Avianca flies to Cuzco, but Copa doesn’t. In addition, the only other alliance that connects to Cuzco is Oneworld via LATAM.

Machu Picchu
A closer tie-up between Avianca and United could make it easier to visit Machu Picchu. Photo: Jay Singh

Overall

United has invested millions of dollars in Avianca. The last thing they want is to see it go bust. Not only would United’s financial stake be harmed, but so would their opportunities to fly more passengers to South America. After all, airlines make more money when their planes are full.

What do you think will come of these new changes? Let us know in the comments!

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