Chilean businessman Holger Paulmann, the CEO of Sky Airline, has agreed to the merger with the Colombian airline Avianca, as it looks to become the largest low cost airline in Latin America.

The merger is expected to be completed by the end of 2021 or early 2022, pending regulatory approvals. Both airlines will retain their brands for now.

Paulmann, who will become a regional director of the new Avianca, will retain a minority stake in Sky Airline, the airline his father founded.

Sky Airline was approached by the investors in Avianca, Elliot and Caoba, who will take 40% of the Chilean firm in exchange for an injection of between US$60-70 million.

SKY will become a subsidiary of Avianca, and Paulmann will be a shareholder of the parent company.

Avianca has since said it has no knowledge of such a transaction.