United Continental Holdings Inc., looking for ways to build
partnerships in Latin America, said Friday it will invest $100
million for a 5% stake in Azul Linhas Aereas Brasileiras SA,
Brazil's third-largest airline.
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. The company carried 21
million passengers last year and has a fleet of 145 aircraft.
The agreement 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 began flying in late 2008, was founded by David
Neeleman, a serial airline entrepreneur who has started four
low-cost carriers. The third, and his best known, is JetBlue
Airways Corp. in the U.S., which started flying in 2000. JetBlue
forced out Mr. Neeleman in 2007 and the executive, who has U.S. and
Brazilian citizenship, headed south to start Azul on a similar
footing: generous legroom, in-flight entertainment, complimentary
beverages and snacks, and low fares.
Azul, which has its main base in Campinas, about 50 minutes from
downtown Sã o Paulo, got a boost in 2012 when it acquired another
Brazilian discounter, Trip. Azul also operates more than 50 daily
flights from Sã o Paulo's Guarulhos International Airport, an
airport United serves from the U.S.
Brazil's two largest airlines already have relationships in the
U.S. Tam, the biggest, which is part of Latam Airlines Group SA, is
tied to American Airlines Group Inc. as a member of American's
Oneworld global alliance. Before joining Latam Airlines Group, Tam
was a member of the Star Alliance, the marketing group anchored by
United. So United had a hole in its network when Tam left its
club.
No. 2, Gol Linhas Aereas Inteligentes SA, teamed up with Delta
Air Lines Inc. in late 2011, when the U.S. carrier paid $100
million for a 3% stake in Gol as part of a broad alliance. Delta
also got a seat on Gol's board.
Avianca Holdings SA, a Colombian carrier with satellite branches
in Peru, Ecuador, Brazil and Central America, is a member of Star
Alliance, But Avianca Brazil is a relatively small operation, the
country's No. 4 airline with 7 million passengers carried last
year, according to research firm Centre for Aviation. Azul is
unaffiliated with a global marketing alliance.
"Brazil is an important market in United's global route
network," said Jim Compton, United's vice chairman and chief
revenue officer. "This partnership with Azul further strengthens
our ties to the region."
United flies to both Sã o Paulo and Rio de Janeiro, operating
five daily flights to Brazil from its hubs in Chicago, Houston,
Newark, N.J., and Washington's Dulles International Airport. With
government approval, United intends to place its code on Azul
flights from Guarulhos Airport to destinations throughout Brazil,
and on Azul's flights to Florida.
With government approval, Azul plans to place its code on United
flights throughout North America and the Caribbean. "This will be
great for customers," said Mr. Neeleman, chief executive of Azul.
"Brazilians will have access to destinations in United's world-wide
route network, while U.S. customers will be able to fly
conveniently to famous destinations in Brazil, such as Belo
Horizone, Iguazu Falls and the Amazon."
MileagePlus and TudoAzul frequent-flier members will have
reciprocal benefits to earn and redeem miles systemwide on both
airlines.
Azul, which is majority owned by Mr. Neeleman, has several times
made plans for an initial public offering and then pulled back. The
Brazilian air market, once red hot, has cooled considerably due to
the nation's recent economic problems, with domestic demand ebbing
and fares showing weakness.
The carrier late last year spread its wings abroad by starting
flights from Campinas to Orlando and Fort Lauderdale, Fla. It plans
to add flights to Orlando from Belo Horizonte late this year.
Mr. Neeleman and a Portuguese partner earlier this month won
approval to acquire 61% of recently privatized TAP Portugal, that
nation's money-losing flag carrier, for 354 million euros. A
planned cash injection is also in the cards along with a ramping up
of TAP flights to the U.S. and Brazil. TAP, also a member of Star
Alliance, is the leader in seats offered between Western Europe and
Brazil, followed by TAM, according to Centre for Aviation.
Write to Susan Carey at susan.carey@wsj.com
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