LatAm giants open to public scrutiny

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Shares in all six of region's largest carriers now listed after launch of Avianca-TACA and Aeromexico IPOs

Successful offerings and listings by Avianca-TACA and Aeromexico have brought the last of Latin America's airline giants onto the public market.

Avianca-TACA has raised $260 million in an initial public offering in Colombia, while Aeromexico raised $330 million in Mexico. Both IPOs attracted strong local interest, with the Avianca-TACA offering five times oversubscribed. Aeromexico boosted its offering 43% after early indications of strong interest, and it was still oversubscribed at a two-to-one ratio.

Unlike some of its major latin carrier rivals, Avianca-TACA and Aeromexico have not yet listed outside their own countries or on the New York exchange, but analysts predict this could come soon.

Fabio Villegas, executive president of the Avianca-TACA group, told reporters: "Our competitors are in the public market, so we want to be there too." He cites the benefit of better corporate practices as a result of being "under the magnifying glass of the different analysts who follow the industry".

Both carriers have been listed before. Avianca withdrew from Colombia's stock exchange in 2002, so it could merge Aces and Sam into the group. Two years ago it made a successful $247 million bond sale, but this is its first venture into the equity market since its merger with TACA last year.

Aeromexico was publicly listed on Mexico's stock exchange for its privatisation, but withdrew in 2008 after it was bought by private Mexican investors. Airline chief executive Andres Conesa says the goal of its IPO was "to invite more Mexican investors to participate" in the airline's future development.

The Aeromexico IPO put almost 18% of its capital in the hands of individual and institutional investors. Villegas claims Avianca-TACA's IPO brought it some 50,000 new investors. Such broad ownership is a new experience for both airlines.

Improved financial results at both Aeromexico and Avianca-TACA helped their IPOs, but the Latin aviation sector itself has gained recent favour with investors. Analysts see the stronger Latin carriers thriving due to limited competition, the region's economic progress, rapid middle-class growth and low unemployment, While much of the rest of the world is still struggling to recover from the global financial crisis, the International Monetary Fund warns that Latin American economies are instead in danger of overheating.

For more on Avianca-TACA, see our 2009 cover interview with Fabio Villegas at: flightglobal.com/Villegas