Colombian flag-carrier Avianca's parent, Synergy Aerospace, is in negotiations to acquire Ecuador's largest domestic airline AeroGal.

Speaking to premium news service ATI, Synergy owner and president German Efromovich confirmed that a memorandum of understanding has been signed under which Synergy can exercise an option to acquire 80% of the company until March 2009.

This would leave the remaining 20% in the hands of the current owner, the Sommerfeld family. Current president Gabriela Sommerfeld will remain in her role should the option be exercised.

Synergy is already the corporate parent of Ecuador's VIPSA and Ocean Air in Brazil.

Avianca A330
 © Avianca

"We have signed the option as a way to avoid a costly due diligence process. We have started already an operational and commercial alliance between Avianca and AeroGal which allows us to know each other better and to take a final decision", Efromovich says.

He confirms that substantial steps have already been done to bring both companies together. "Our current Ecuadorian subsidiary VIPSA has already been put under AeroGal management control, although without changing our ownership of the company," he explains.

Additionally, a Boeing 757-200 whose lease contract with Avianca expires this month has been transferred to AeroGal which will use it on a new route to Miami.

This agreement points to the rapid consolidation of the Ecuadorian domestic market which, being a small one, has been historcially dominated by AeroGal, Icaro, air force-owned TAME and, to a smaller extent, VIPSA. These carriers compete fiercely for a limited number of passengers.

The local aviation landscape will dramatically change shape with the entry of Lan Ecuador into domestic markets in April, which will put strain on Icaro and AeroGal since neither has a broad international network to support domestic traffic flows. They could also be hurt by new fuel tax rules which will penalise the operators of old aircraft such as Icaro's and AeroGal's Boeing 737-200s.

AeroGal's entry into Avianca's sphere will provide it with the necessary international connections to compete with Lan.

Source: Air Transport Intelligence news