(Adds United executive comments on partnership outlook, second byline)
By Priscila Jordão and Jeffrey Dastin
SAO PAULO/NEW YORK, June 26 (Reuters) - United Airlines has agreed to pay $100 million for a 5 percent stake in Azul SA, Brazil's third-biggest airline, as it attempts to catch up with U.S. rivals with more established ties in South America's biggest air travel market.
Azul's founder and chief executive, David Neeleman, who also founded JetBlue Airways Corp, announced the deal on Friday in Sao Paulo. United Continental Holdings Inc will name a representative to Azul's board, and the two airlines have struck a codesharing agreement subject to government approval.
For United, the deal will open more Brazilian cities to its customers. For Azul IPO-AZUL.N, the investment should ease the urgency of an initial public offering, which Azul has delayed several times since 2012 as Brazil's slumping economy unnerved investors.
Neeleman, who also acquired a 61 percent stake in Portuguese carrier TAP this month, said Azul still planned to list shares "when the outlook improves."
The United investment will be made in the form of a capital injection, slightly diluting the stakes of existing shareholders.
Airlines that operate across borders often seek antitrust immunity so they can coordinate ticket prices and schedules to ease customers' connections.
United views the tie-up as the start of a "long-term" relationship that could be strengthened further as opportunities arise, the airline's Chief Revenue Officer Jim Compton said in an interview.
The Chicago-based carrier would be excited if Azul joins its global airline partnership, the Star Alliance, but the decision is up to Azul and Star's other carriers, he said.
United currently flies into Guarulhos, Sao Paolo's largest international airport. While Azul has a bigger hub at nearby Campinas, the partners will focus on adding destinations from Guarulhos so travelers can connect to more places in Brazil, Compton said.
The tie-up follows big strides in Brazil by United's main rivals. Delta Air Lines Inc bought a 3 percent stake in Brazil's No.2 airline Gol Linhas Aereas Inteligentes SA for $100 million in 2011, when the Brazilian currency was 40 percent stronger.
Last year, Brazil's biggest airline, the TAM division of Latam Airlines Group SA, left Star Alliance to join rival American Airlines Group Inc's, OneWorld Alliance.
"Both United and Star Alliance need more presence in South America because of the region's growing economies and to remain competitive serving corporate travelers," said industry analyst Henry Harteveldt.
The deal paves the way for customers to earn reward miles when flying either airline, United said. (Writing by Brad Haynes; Editing by Bernadette Baum and Marguerita Choy)