(Recasts with additional details on Avianca Brasil’s restructuring)
By Marcelo Rochabrun
SAO PAULO, April 3 (Reuters) - Brazilian airline Avianca Brasil plans to split into seven units that it will auction off separately, with rivals LATAM Airlines and Gol Linhas Aereas Inteligentes both planning to bid for some of those parts in a bankruptcy auction.
The plan to split up the carrier, filed in a Brazilian court on Wednesday, is a significant departure from a previous proposal and adds fresh competition for some of the most-coveted airport slots in Brazil. But it also shuts the door on a previous offer by competitor Azul SA.
Azul signed a preliminary agreement this month to pay at least $105 million for a selection of Avianca Brasil’s assets, a proposal that had been considered a coup by analysts who saw it as a way for Azul to challenge its bigger competitors: LATAM and Gol.
Azul also last month gave Avianca Brasil a much-needed cash injection of 31.6 million reais ($8.21 million) after it fell behind on its payroll.
But Avianca Brasil’s new plan involves dividing up the assets Azul sought, which include airport slots and its loyalty mileage program, into multiple new companies.
Gol and LATAM are now offering at least $70 million each, and both said their bids had been requested by Avianca Brasil’s largest creditor, hedge fund Elliott Management.
A person involved in the bankruptcy proceedings said last week that disagreements had emerged between Azul and creditors that threatened to derail the initial $105 million offer.
Azul declined to comment on the status of its potential bid. To be sure, Azul could still bid, but not under its initial proposal, which had also included taking over many of Avianca’s aircraft leases.
Azul Chief Executive Officer John Rodgerson told Reuters in March that he thought it was unlikely that LATAM or Gol could bid for Avianca Brasil, due to potential antitrust issues. But splitting up Avianca Brasil into smaller chunks could help those carriers carve up desirable airport slots and avoid antitrust troubles.
Avianca Brasil, the country’s fourth-largest airline, filed for bankruptcy in December after falling behind on payments to aircraft lessors. Despite the lack of payments, Brazilian judges have repeatedly allowed the struggling carrier to keep flying its planes.
$1 = 3.8482 reais Reporting by Marcelo Rochabrun; Additional reporting by Tatiana Bautzer; Editing by Bernadette Baum and Susan Thomas