United Airlines Deepens Control of Avianca After Shareholder Default

By Paul Riegler on 24 May 2019
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DSC_0011 (2)Control of Colombian carrier Avianca could pass into United Airlines’ hands following the default of Avianca’s biggest shareholder, BRW Aviation, on a loan secured by its 51.5% share in the airline.

The Chicago-based airline said late Friday it would strengthen its partnership with the Colombian airline and that it is prepared to lend it up to $150 million.

“We took this action to strengthen our partnership with Avianca and give Avianca’s management team and employees the very best opportunity to succeed,” United said in a memo to employees.

Avianca last week revealed that BRW Aviation, a company controlled by Germán Efromovich and Avianca’s biggest investor, defaulted on the $456 million loan from United.

United’s relationship with Avianca is complicated by the fact that, under its current contract with its pilots, it cannot run another airline. In addition, many countries including the United States and Colombia restrict foreign majority ownership of airlines. As a result, shares owned by United in Avianca will be controlled for voting purposes by another Avianca shareholder, Kingsland Holdings Limited.

Avianca was a failing airline when Efromovich’s holding company acquired it in 2004.  The Bolivian businessman since turned it around and built it into Latin America’s second largest carrier.

(Photo: Accura Media Group)

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