The interest comes as U.S. airlines are increasingly using cash to solidify key international alliances and ensure business customers access to the entire globe.
The battle between U.S. airlines to control global skies has shifted to Colombia, where rivals Delta Air Lines and United Continental Holdings are both considering investments in struggling Avianca Holdings.
Advisers to Avianca are soliciting potential investors to make a $500 million capital injection in the airline, with Delta and United among a handful of potential bidders according to an airline source. The talks were first reported by The Wall Street Journal.
An airline source reached Friday confirmed the interest by the U.S. companies but called it "preliminary," saying it is far from certain what if any bids will emerge. Colombia, unlike many countries, does not have caps in place that would prevent a foreign company from taking full control of a domestic airline, but the source cautioned that with all of Avianca's operating units in various countries an outright purchase could be "messy."
A second source said that the U.S. carriers would likely prefer to avoid an outright acquisition, and instead make a sizeable enough investment to have influence on the future direction of the airline.
Avianca ranks as one of the world's oldest airlines, founded in 1919 and still focused out of its hub at El Dorado International Airport in Bogota. The company used a series of acquisitions including its 2009 deal for Transportes Aereos del Continente Americano to build a stable of eight nationally branded airlines spread across Central and South America, ranking as Latin America's second-largest aviation group.
But the airline of late has been focused on paring down its debt, announcing last month it would trim aircraft deliveries to conserve cash and weather the region's economic downturn. Soliciting investment is part of that process, the source said.
Cut off from further large-scale consolidation at home, U.S. airlines led by Delta have been aggressively investing overseas in hopes of solidifying key partnerships and ensuring access to important markets. Delta is in the process of building its stake in Mexico's Grupo Aeromexico to near 40%, and also owns a 49% stake in the U.K.'s Virgin Atlantic Airways and minority investments in China Eastern Airlines and Brazil's GOL Linhas Aereas Inteligentes.
Chicago-based United Continental, meanwhile, has an investment in Brazil's Azul Linhas Aereas Brasileiras.
Latin America's largest carrier, Chile-based LATAM Airlines, is closely aligned with American Airlines, leaving American's rivals to play catchup in the region.
It is unclear how aggressive either Delta or United Continental would be in a bidding war for Avianca, but Delta has a history of acting aggressively and United Continental would be loath to see Avianca leave United's Star Alliance and align with Delta, leaving Star weaker in Latin America. The source said that it is possible other Star Alliance carriers including Germany's Lufthansa could also get involved in the process should there be competing bids for the airline.
Atlanta-based Delta has an investment-grade credit rating and the stronger balance sheet, though United wouldn't have much trouble coming up with the cash needed to fund an investment in Avianca, which has a market capitalization of about $650 million.
Delta has attempted to use its wallet to elbow in on international alliances in the past. In 2009, the airline offered to invest in Japan Airlines during that company's restructuring in a bid to lure JAL away from American Airlines and the Oneworld alliance and into Delta's Skyteam. JAL instead emerged from bankruptcy still aligned with Oneworld.
By Lou Whiteman (The Street)