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AMERICAN AIRLINES GROUP INC.

(AAL)
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American Airlines plans tie-up with budget carrier JetSMART in South America

07/29/2021 | 08:49am EDT
FILE PHOTO: An American Airlines plane takes off from Sydney Airport in Sydney

CHICAGO (Reuters) - American Airlines said on Thursday it is proposing acquiring a minority stake in budget carrier JetSMART in South America as part of a tie-up aimed at fueling growth in the region as demand recovers from the COVID-19 pandemic.

Texas-based American, the largest U.S. operator of flights to South America, did not disclose the size, price or timing of the proposed investment in private-equity-owned JetSMART, which operates primarily from Chile and Argentina.

The proposal follows an abrupt end to American's partnership with Chilean-based LATAM Airlines when rival Delta Air Lines launched a surprise acquisition of a 20% stake for $1.9 billion in 2019, forcing American's search for a new partner.

"This proposed investment in JetSMART would give customers access to the largest network, lowest fares, and best travel loyalty program in the Americas," said Vasu Raja, American's chief revenue officer.

The deal would help JetSMART expand its ultra-low-cost business model across South America and enable American to grow its long-haul network thanks to wider connecting options in the region.

"By connecting and growing our respective networks, and maintaining our distinct business models, we see a compelling value proposition," said JetSMART Chief Executive Estuardo Ortiz.

Passengers who fly on JetSMART within South America would be able to earn miles with American's loyalty program.

American inked a similar deal with New York-based budget carrier JetBlue Airways last year and does not rule out deals with other ultra-low-cost business models.

"There's a lot about this partnership that can scale," Raja told journalists, while adding, "But we need to walk before we can run."

JetSMART is owned by Phoenix-based Indigo Partners, which was founded by no-frills-airline tycoon Bill Franke and whose other investments in low-cost carriers include Wizz Air in Europe, Frontier Airlines in the United States, Volaris in Mexico, Philippines-based Cebu Pacific and Canadian start-up Enerjet.

(Reporting by Tracy Rucinski; Editing by Leslie Adler)

By Tracy Rucinski


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN AIRLINES GROUP INC. 1.85% 20.9 Delayed Quote.30.12%
DELTA AIR LINES, INC. 2.40% 42.59 Delayed Quote.3.43%
EURO / ARGENTINE PESO (EUR/ARS) 0.22% 115.4137 Delayed Quote.12.16%
JETBLUE AIRWAYS CORPORATION 3.62% 15.73 Delayed Quote.4.40%
LATAM AIRLINES GROUP S.A. 2.55% 1277.1 End-of-day quote.0.86%
US DOLLAR / ARGENTINE PESO (USD/ARS) -0.15% 98.333 Delayed Quote.16.88%
WIZZ AIR HOLDINGS PLC -1.58% 5110 Delayed Quote.13.76%
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Financials (USD)
Sales 2021 29 808 M - -
Net income 2021 -1 987 M - -
Net Debt 2021 31 548 M - -
P/E ratio 2021 -5,74x
Yield 2021 -
Capitalization 13 286 M 13 286 M -
EV / Sales 2021 1,50x
EV / Sales 2022 1,05x
Nbr of Employees 117 400
Free-Float 98,1%
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Number of Analysts 22
Last Close Price 20,52 $
Average target price 20,28 $
Spread / Average Target -1,19%
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Managers and Directors
William Douglas Parker Chairman & Chief Executive Officer
Robert D. Isom President
Derek J. Kerr Chief Financial & Accounting Officer, Executive VP
Maya Leibman Chief Information Officer & Executive VP
Kevin Brickner Senior Vice President-Technical Operations