The Abra Group explained – what does it mean to Latin America |

This month, Avianca and GOL shareholders announced the launch of the Abra Group Limited, a new holding that looks relatively similar to the International Airlines Group in Europe. The Abra Group Limited will be composed of Avianca, GOL, Viva Colombia, and Viva Perú and will also have a small investment in Sky Airline. What does it mean for the region? LATAM’s new biggest rival Suppose the Abra Group Limited gets approval from the authorities in Colombia, Brazil, and elsewhere. In that case, it will automatically have the largest fleet of operational and ordered aircraft in the Latin American region. Avianca has a fleet of over 130 aircraft, plus an order to receive up to 138 aircraft between 2025 and 2031 (an 88 jetliner order plus purchase options for an additional 50 Airbus A320neo aircraft and two Boeing 787 Dreamliners). GOL has a fleet of 142 Boeing 737 aircraft, including 111 NGs and 31 MAX, and an order for around 98 MAX additional aircraft, which has been receiving in the last few months. Viva has 23 Airbus A320neo aircraft and an unfilled order for an additional 27 units. Abra Group Limited could have a fleet of around 500 aircraft, more than the current fleet size of LATAM. Constantino de Oliveira Junior, Abra Group’s CEO, said: “This agreement places Abra’s airlines in a position to lead air travel within the region – serving a population of over one billion and GDP of nearly three trillion US dollars – providing significant opportunities for capacity and revenue growth. This new holding will put additional pressure on LATAM in critical markets such as Brazil, which is already in a contested battle against GOL. Both airlines are one and two above David Neeleman’s Azul in terms of passengers and market share. Fitch Ratings said this about GOL, “The new holding company is expected to hold shares of GOL and Avianca Holdings S.A.’s main shareholders. This is likely to favor GOL’s business position in the medium and long term. It should provide an opportunity to enhance scale and access to a network with low overlap and a broader international routes system and stronger cargo operations and mileage program.” No fleet commonality When Avianca and Viva announced they would be under the same holding, it made perfect sense. Avianca would attract a low-cost competitor under its wing, Viva would find new financial stability, and both airlines would grow as independent brands but complement each other operations. Moreover, both carriers have Airbus A320-family fleets for domestic and short-haul services, with high-density seating. But the alliance with GOL doesn’t provide the same fleet commonality. GOL is Boeing’s leading customer in the Latin American region. Nonetheless, it shouldn’t be a problem if we take a look at how IAG works. Iberia has a fleet mainly composed of Airbus aircraft, but IAG has just signed a massive deal to acquire 50 MAX aircraft plus 100 options. Diversifying the fleet will spur competition, said Willie Walsh in 2019, when he still was IAG’s CEO. The same can happen in the Americas with the new Abra Group. The challenges Avianca, GOL, and Viva have different business models. Adapting them under the same holding will be a challenge that could impact the holding’s bottom line. Moreover, Avianca has an ongoing partnership with United Airlines and GOL with American Airlines. So far, neither US operator has signaled rejection against the new holding. On the contrary, American and GOL have just strengthened their partnership by increasing the benefits for the travelers by redeeming and earning points in their mileage programs. If demanded by the region's regulators, the Abra Group could also lose key slots in airports across South America (São Paulo and Bogotá, for example). Just a final thought. What does this mean for Chile's Sky? At the moment, not much. There will be no change in management, and the airline will remain independent of the Abra Group. Nonetheless, we should not rule out a bigger investment in the future, which could bring the Chilean ULCC to the South American holding.

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