FUSION AVIANCA AND UNITED AIRLINES

Hernan Arias Funieles; 200092917

Avianca Holdings is an air-commercial consortium resulting from the merger of the

Colombian airline Avianca, and the Salvadoran airline TACA, based in Panama City.

Which was created in February 2010 by SYNERGY GROUP, which is the majority

shareholder of this company, whose company belongs to German Efromovich, who bought

Avianca after falling into bankruptcy in 2004 and thus making it the second airline Largest

in Latin America.

SYNERGY GROUP (owner of Avianca) contracted a debt of 450 million dollars, whose

loan was granted by United Airlines, which was agreed to be paid in five annual

installments, where Synergy group used as collateral most of the shares of the company

Avianca Holdings for this loan. This debt was contracted in order to settle a debt that it had

with the Elliot Management Corp. hedge fund. However, the Synergy Group company

failed to comply with one of the financial guarantees that were previously stipulated in the

financing agreement with United Airlines. that allowed United Airlines to take possession

of Avianca's shares and thus merging and gaining power over this company.

It can be said that corporate mergers are seen as a resurgence, where mistakes committed in

the past can be rectified, Avianca Holdings SA was in the process of redefining corporate

strategy, which was based on a growth and expansion model, the which is now focused on

profitability and operational efficiency, so one of the benefits that this merger will bring is

that the airlines will have coverage in the United States, Argentina, Belize, Bolivia, Chile,

Colombia, Costa Rica, Ecuador, El Salvador, Guyana, French Guyana, Guatemala,

Honduras, Nicaragua, Panama, Paraguay, Peru, Suriname, Uruguay and Venezuela. The

CEO of Avianca, Hernán Rincón, said that "this alliance will allow Avianca's airlines to

strengthen their position as a first-class player in the airline industry in the Americas;

because with United and Copa we will expand our service reach in the continent to offer

better connectivity to our customers. " However, this merger is having negative

consequences, because they are leaving doubts in investors for the impact on the company,

since the price of Avianca's stock had a significant drop in the market, also having a

powerful partner has its negative consequences , since United Airlines increased its market

share this can lead to disputes or conflicts of interest where there may be a power struggle,

and consequently incoordination in decision making.

However, the advantages are many, since, United Airlines is a leading company in the air

transport market like Avianca, which provides a combination of resources and experience

in the type of business, which in this case is the commercial airline, In addition to an

increase in capital in order to increase profitability and the relationship between the two

parties would be closer, so that they support each other in the achievement of objectives.

In conclusion, mergers represent a good business strategy for companies, everything

depends on the performance you have, with respect to corporate governance, I think that

United Airlines being one of the leading companies, can complement or redefine some

government concepts in Avianca Holdings, in such a way that more clarity and

understanding is added in the corporate development, and in this way to achieve the

objectives previously set.

REFERENCES
https://www.eltiempo.com/economia/empresas/acuerdo-de-avianca-y-united-airlines-299982

http://ir.united.com/corporate-governance/board-of-directors

http://ir.united.com/company-information/company-overview

https://www.reportur.com/colombia/2018/12/10/united-da-millonario-prestamo-los-duenos-avianca/

https://www.larepublica.co/empresas/la-letra-menuda-del-acuerdo-entre-united-airlines-y-avianca-holdings-
2855500

http://aviancaholdings.com/Spanish/gobierno-corporativo/default.aspx

http://aviancaholdings.com/Spanish/inicio/default.aspx