Avianca and United expected to announce Joint Venture very soon, says JP Morgan

Analysts at JP Morgan have improved their outlook for Avianca, based in part on the expected announcement of a joint venture with United Airlines. For its part Kingsland, which represents the Salvadoran family Kriete and had sued Avianca, is waiting for the details of the agreement.

The joint venture agreement between Avianca and United Airlines has been held up in negotiations since the end of 2016 but could be ready for ratification and signing imminently, according to a recent report by credit rating analysts at JP Morgan.

According to JP Morgan, the new alliance will lead to operational improvements for Avianca.

This is one of the factors that the rating analysts considered when they improved their recommendation for Avianca stock, and raised the target price of its shares from $ 9 to $ 13.

"JP Morgan notes that the agreement between Avianca and United could get them to share revenues on some flights between Colombia and the US”, said industry experts.

JP Morgan analysts Fernando Abdalla, Carlos Louro and Pedro Pascoal argued that these operational improvements have not yet been incorporated into the price of Avianca shares, so they raised the price and changed their recommendation from neutral to overweight.

The president of Avianca, Hernán Rincón, announced early last December that the negotiations with United had ended and the next step was the approval of the board of directors of the Colombian airline.

"We already reached a business agreement. We were in Chicago four weeks ago and closed everything that was pending. The legal representatives have already been given the information so that it becomes a contract, "said Rincón on December 6th 2017.

Kingsland waiting

For its part Kingsland, the company that represents the Salvadoran family Kriete who are a significant shareholder in Avianca, is waiting to hear the terms of the agreement with United.

Kingsland has filed a lawsuit in New York against Germán Efromóvich, the president of Synergy Group and the main shareholder of Avianca, against his brother José Efromóvich, against Avianca and against United.

At the end of last November, Avianca announced that it had reached an agreement with Kingsland and that this second company would withdraw its lawsuit about the negotiations with United. However, a few days later, in early December, Kingsland clarified that the withdrawal of its lawsuit was temporary.

"Kingsland and other parties involved agreed not to pursue the litigation in order to focus on agreement negotiations that, if successful, could resolve their significant differences and hope to be able to complete them in the near future," the company said in a statement.

Kingsland added that, if the terms of the agreement between Avianca and United did not satisfy them, they reserve the right to reopen the legal dispute.