August 22, 2017 / 8:08 PM / a year ago

Avianca expects to be one of only two major carriers in Latam: CEO

(Reuters) - Avianca AVT_p.CN Chief Executive Hernan Rincon said on Tuesday he expects the Colombian airline to become one of only two major international carriers connecting the Latin American region with global destinations.

FILE PHOTO - Hernan Rincon, CEO of Avianca poses for a picture during a reception at the 2016 International Air Transport Association (IATA) Annual General Meeting (AGM) and World Air Transport Summit in Dublin, Ireland June 2, 2016. REUTERS/Clodagh Kilcoyne

Rincon said in an interview with Reuters in New York that the airline is working to boost its presence in Argentina and Mexico, where parent company Synergy Holding is negotiating a 49 percent stake in Aeromar Airlines. Synergy purchased Argentine carrier Macair Jet in 2016.

“There will continue to be some smaller regional airlines of course, but airlines that have the capacity to serve all of Latin America … We believe that there will be only two,” Rincon said, adding that he expects Chile’s Latam Airlines to be the other.

“We’re building for that,” he said.

Synergy rather than Avianca itself is spearheading the effort, but the Bogota-based airline it controls will be at the center of future deals from an operations and strategic perspective, Rincon said.

Avianca, which is also studying a potential merger with its sister airline in Brazil, flies to Argentina and Mexico but its footprint is limited. Avianca also has a limited presence in Chile, which Rincon said is unlikely to change in the near future.

One market Avianca is not betting on is Venezuela, where it recently halted all flights, a decision Rincon said it is willing to revisit “as soon as the situation improves” and the country makes changes to things like security, jet fuel quality and delivery and airport conditions.

Rincon said Avianca has given Venezuela a list of requirements for the airline to re-establish service to the country, which is on the verge of default and experiencing regular shortages of food and medicine.

Another major step in the company’s expansion plans is an agreement with United Continental Holdings Inc that Rincon said would help Avianca expand beyond the 20 U.S. destinations it expects to serve directly within the next two years.

That deal is still being negotiated and faces a legal challenge from Avianca’s No. 2 shareholder, Kingsland Holdings Ltd, which alleges the proposed agreement would benefit Synergy’s principal, German Eframovich, at the expense of other shareholders.

Kingsland has filed a motion to halt the deal until shareholders vote on whether to appoint an auditor to examine transactions between Avianca and Synergy.

Rincon said he still expects the deal to happen this year and for the lawsuit to be dismissed.

Reporting by Dion Rabouin; editing by Christian Plumb and Cynthia Osterman

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