Azul Trip aims to get merger green light by end-2012

Washington DC
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Brazilian carriers Azul and Trip hope to complete their merger by the end of the year, following approvals from the relevant national authorities.

Securing the necessary approvals from Brazil's civil aviation authority and competition authority will likely take about six months, says Gianfranco Beting, director of branding, product and communications of Azul Trip SA, the holding company that will integrate the two airlines.

"Hopefully it will happen by the end of the year. It might slip into 2013," he says.

The two airlines announced their intentions to merge on 28 May, forming the third largest carrier in Brazil after rivals TAM and Gol.

TAM had earlier planned to take a 30% stake in Trip, but that deal fell through earlier this year, leaving Trip to look for other options, says Beting.

"Our discussions gained momentum after that... our vision and values are pretty much the same, and both airlines are growing," he adds.

The merger will involve an exchange of shares, with Azul to hold two-thirds of the shares in the merged company and Trip to own the remaining one-third.

Azul founder and chairman David Neeleman will remain the chairman of the merged airline, while a chief executive remains to be appointed. Beting says the merged carrier's chief will likely be an executive from either carrier.

Currently, the networks of both airlines overlap in only 15% of the markets that are served, says Beting. Azul Trip sees great potential in expanding to more medium-sized cities as well as destinations that can be served more efficiently with the two carriers' combined fleets of Embraer E-jets and ATR turboprops.

"We have the right airplane size for growth, which is coming from cities with limited air service. We have a fleet that goes up to a hundred plus seats, and we are better sized for this," says Beting.

While Azul Trip's main priority is to expand its domestic network, the merged carrier does not rule out expanding to international destinations. However, this will be limited to regional destinations like Buenos Aires, says Beting, who indicates that the airline is not likely to acquire longer range aircraft to fly further.

Azul is likely to take delivery of at least 10 aircraft by end-2012, comprising both ATR 72-600s and Embraer 195s. Trip is planing to add three to four more aircraft this year, including one E190 and a number of ATR 72-500s/600s, says Beting.