United To Pay USD$100 Mln For Azul Stake

United Airlines has agreed to pay USD$100 million for a 5 percent stake in Azul, Brazil's third-biggest airline, as it attempts to catch up with US 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, announced the deal in Sao Paulo. United will name a representative to Azul's board. 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, the investment should ease the urgency of an initial public offering, which it has delayed several times since 2012 as Brazil's slumping economy unnerved investors.

Neeleman, who acquired a 61 percent stake in Portuguese carrier TAP this month, said Azul still plans to list shares "when the outlook improves."

The United investment will be made in the form of a capital injection, diluting the stakes of existing shareholders.

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.

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 improve connections to more places in Brazil, Compton said.

The tie-up follows big strides in Brazil by United's main rivals. Delta bought a 3 percent stake in Brazil's No.2 airline Gol for USD$100 million in 2011, when the Brazilian currency was 40 percent stronger.

Last year, Brazil's biggest airline, the TAM division of Latam Airlines, left Star Alliance to join rival American Airlines' oneworld alliance.