Avianca and Grupo TACA have formally completed a landmark deal which will result in 13 carriers from 10 Latin American countries becoming part of one airline holding company.

The two airline groups announced today they have secured all the regulatory and antitrust approvals required to establish a new parent company, completing a process which began when their "strategic merger" was announced in October 2009.

As a result the carriers can now formally establish Avianca-TACA Limited, their new Bahamas-based parent company, and begin the process of strategically integrating the two companies.

As originally announced in October, Avianca owner Synergy Aerospace will have a 67% stake in Avianca-TACA with Grupo TACA parent Kingsland Holding owning the remaining 33%. ATI reported in October that although Avianca owner German Efromovich will have a majority stake in the new company, the transaction is considered "a merger of equals" with Synergy and Kingsland each having equal say on strategic issues.

Going into Avianca-TACA will be all three of the Colombian carriers currently under the Avianca structure - Avianca, SAM and Tampa. Synergy's stake in Brazil's Ocean Air and Ecuador's AeroGal will also transfer to the new parent company.

On the Group TACA side, 100% of the shares in El Salvador-based TACA International will transfer over to the new parent company. Also moving over to Avianca-TACA are the shares Grupo TACA now has in seven much smaller carriers: TACA Peru; Costa Rica's Lacsa and Sansa; Guatemala's Aviateca; Nicaragua's La Costena; Panama's Aeroperlas; and Honduras' Islena.

Sansa, Aviateca, La Costena, Aeroperlas and Islena are all regional carriers that operate turboprops under the TACA Regional brand.

While all the carriers will remain separate operating entities the "strategic merger" is designed to promote synergies of the combined network. Avianca-TACA will have the largest network in Latin America, serving 75 cities in the region and more than 100 cities globally.

The carriers combined generate about $3 billion in annual revenues, making Avianca-TACA the fourth largest airline group in Latin America behind LAN, TAM and GOL. Combined the carriers operate 129 aircraft and have almost 12,000 employees.

The airlines say as part of the merger agreement they will now pursue a "strategic integration" that will strengthen their position in the fast growing Latin American market and will follow a common vision.

"I am confident on the talent, capacity and enthusiasm to build and develop a world class airline service team. The operational excellence and the culture of high performance focused on the client constitute the basis of this alliance, and will allow us to leverage the synergies that the airlines jointly generate," explains Avianca CEO Fabio Villegas, who will become CEO of the new parent company.

As originally announced current TACA COO Estuardo Ortiz will be the new company's COO while current Avianca CFO Gerardo Grajales will serve as the new company's CFO.

Grupo TACA's current CEO, Roberto Kriete, will be president of the joint venture's board of directors. The Kriete family also owns Kingsland Holdings.

"I feel confident that the excellent team that comprises the Avianca-TACA family will fully respond to the challenge to provide the service and quality that we all expect," Efromovich says.

Source: Air Transport Intelligence news