Azul offers to buy up parts of Avianca Brazil

Brazilian airline Azul has reached a $105 million non-binding agreement to take over selected slots, 30 Airbus A320 leases, along with the AOC of near bankrupt carrier Avianca Brazil.

The offer depends on due diligence, regulatory and antitrust approvals, as well as approval by creditors. It could easily take up to three months to complete.

Azul wants to get at Avianca’s Guarulhos and Congonhas airports in São Paulo, and Rio de Janeiro’s downtown Santos Dumont airport.

The acquisition at Congonhas would triple Azul’s slots there, but leave it with less than 30% of the access of larger rivals Latam and Gol.

A preference given to established carriers in the distribution of slots, has been prohibitive to new entrants at major airports for too long.

Azul is Brazil’s third-largest carrier by passenger volume, but the largest in takeoff and landings, as well as by destinations served. Launched in 2008 it grew by establishing a hub at underused Viracopos airport near São Paulo.

It started serving smaller cities with a fleet of Embraer regional jets and ATR turboprops.

The deal, if it concludes, would double the size of Azul’s Airbus fleet.

However, Avianca lessors have pressed to get their aircraft returned, but through a battery of court orders and appeals, so far Avianca has held off deregistration under the Cape Town Convention. However it can only keep them at bay until a creditor meeting in early April.

Avianca Brazil has operated under bankruptcy protection from creditors since December, but Brazil’s bankruptcy law used by Gol in 2007 when acquiring Varig, allows Azul to take slots and routes, without taking on all of the obligations from Avianca.