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US and Brazil airline JVs to progress with senate approval

US and Brazilian carriers are eager to move ahead with joint venture plans, following the approval of the US-Brazil open-skies deal by the Brazilian senate on 7 March.

The accord, which now has to be signed into law by Brazil President Michel Temer, will pave the way for airlines in both countries to apply for US anti-trust immunity in order to launch joint ventures.

Oneworld carriers American Airlines and LATAM Airlines Group first announced plans for a joint venture in early 2016, but the deal was contingent on US-Brazil open skies being ratified. Anti-trust regulators in Brazil, Colombia and Uruguay have approved the partnership, although a similar authority in Chile has yet to clear the deal.

"American applauds the actions of the Brazilian Congress to approve this open skies agreement with the US, paving the way for the approval and implementation of our joint business with LATAM," says American chief executive Doug Parker.

The planned joint venture between the two airlines will cover flights between the USA and Canada and Brazil, Chile, Colombia, Paraguay, Peru and Uruguay.

Brazil's Azul says it plans to pursue joint venture talks with United Airlines, which owns a 5% stake in Azul.

Both airlines have had some initial discussions, says Azul chief revenue officer Abhi Shah on an earnings call. "The next step for us is to get together with our partners at United and start talking [about a] JV," says Shah. "We had some initial discussions, now we need to accelerate that."

United did not directly comment on a potential joint venture with Azul, saying: "As with our Star Alliance partners at Avianca Brazil, our partnership with Azul offers customers easier connections when flying between Brazil and the United States and connects Brazilian customers easily and efficiently to New York City, Houston, San Francisco, Los Angeles, Las Vegas and more.”

Avianca Brazil had previously also expressed interest in a joint venture with United. The airline, which shares ownership links with Colombia's Avianca, says it is working to extend its codeshare with United, "as well as other alternatives to expand cooperation between the two airlines".

Azul's Shah says a partnership with United will be "very complementary", pointing to the lack of network overlap. However, he says any approval by US regulators will likely take more than a year and thus does not expect any material impact on Azul in 2018.

While both LATAM and Azul appear ready to make progress on tie-ups with their US partners, Sao Paulo-based Gol indicates that it does not plan to deepen its relationship with Delta Air Lines. Delta has a 9.5% stake in Gol.

Gol says there will be "no change" in the airlines' partnership, even though the airline broadly supports open skies. The airline says that the existing bilateral air services agreement between the two countries is sufficient for demand.

A Delta spokesperson says: "Open skies supports Delta’s long-term strategy of enhanced service to Brazil and Latin America."

Story updated with United, Delta and Avianca Brazil comment

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