SAO PAULO (Reuters) – Bankrupt LATAM Airways (LTM.SN) and Avianca Holdings AVT_p.CN are dramatically retrenching their as soon as grand ambitions amid the COVID-19 pandemic, decreasing competitors in Latin America as they mull once-unthinkable cooperation with rivals. FILE PHOTO: An Avianca Airways Airbus A321-200 airplane is seen on the Alfonso Bonilla Aragon Worldwide Airport in Palmira, Colombia August 4, 2019. Image taken August 4, 2019. REUTERS/Luis Jaime Acosta/File PhotoSince May, LATAM has exited Argentina, partnered with rival Azul SA (AZUL.N) in Brazil and reduce home operations in Chile, whereas Avianca has departed Peru. LATAM is now open to a deeper alliance with Azul, whilst the 2 airways normally management a mixed 60% of Brazil’s home market. The scaling again might reshape air journey in Latin America, weakening competitors regionally and driving up ticket costs whereas additionally serving to some carriers survive. The strikes present how the business is already shrinking via attrition, as airways are too cash-strapped to think about shopping for the competitors. “More than consolidation, many airlines will disappear,” stated Eliseo Llamazares, an aviation marketing consultant at KPMG. Latin American governments more and more acknowledge there’s a new actuality, and have shifted their priorities to protecting native airways alive as an alternative of attracting new gamers. Attrition has additionally occurred in Ecuador, the place TAME shut down, and in Mexico, the place Interjet has scaled again. “If this trend is allowed to continue, connectivity around the region will be affected,” stated Peter Cerda, vp for the Americas at IATA, an airline business group. “Less connectivity means less choice, and less choice usually translates into higher prices.” All airways in Latin America face some danger of disappearing, analysts say. Dominant LATAM and Avianca have filed for chapter safety, whereas auditors for Brazil’s Gol Linhas Aereas Inteligentes (GOLL4.SA) are searching for to incorporate a proper warning within the airline’s monetary statements that the provider dangers disappearing. Azul and Aeromexico (AEROMEX.MX) have employed restructuring advisers, whereas Panama’s Copa Holdings (CPA.N) has not flown since late March, straining its funds. One airline that would stand to profit is Chile-based JetSMART, which is contemplating getting into Brazil’s home market. JetSMART’s enlargement is backed by deep pockets at non-public fairness agency Indigo Companions, which additionally holds stakes in Frontier, Wizz Air (WIZZ.L) and Mexico’s Volaris. Indigo Companions founder Invoice Franke advised Reuters he expects to look into serving to finance Avianca’s restructuring. That might convey Avianca nearer to JetSMART, protecting the Colombian airline’s markets protected from competitors. Avianca declined to remark. ‘DIVIDING THE MARKET’ If JetSMART expands to Brazil, it will arrive as competitors is diminishing. Final 12 months, LATAM and Gol fought to maintain Azul from getting into a key Sao Paulo airport. “JetSMART in Brazil would wreak havoc on the current players,” stated an air business govt. However the coronavirus has turned competitors right into a secondary concern, evidenced by the dearth of pushback towards the LATAM-Azul code-share. The code-share “would have been untenable before,” stated Carlos Ozores, an aviation marketing consultant at ICF. The present partnership applies solely to non-overlapping routes, however LATAM stated it’s “open to evaluating the possibility of the eventual future expansion of this code-share” to overlapping routes. “They are dividing the market for themselves,” an govt at a rival airline stated of LATAM and Azul. Gol CEO Paulo Kakinoff stated code-share agreements – through which two or extra airways publish and market the identical flight sharing one plane – will cut back air-travel provide, “which will benefit all of us.” The LATAM-Azul partnership has led to hypothesis concerning the future. “It could be the first step for deeper integration, even a merger,” stated Andre Castellini, an aviation marketing consultant at Bain & Firm. LATAM and Azul deny merger talks, however a supply conversant in the code-share talks stated it’s “possible.” Greater than mergers, so-called joint enterprise agreements are in vogue. Lately, LATAM signed one with Delta Air Strains Inc (DAL.N), whereas Avianca, Copa and United (UAL.O) have introduced a rival one. The agreements permit for deep route integration, with out all of the bills and crimson tape of an precise merger. LATAM was born out of the tough merger of Chile’s LAN and Brazil’s TAM, which saddled the brand new provider with huge bills. Not way back, LATAM and Avianca had their planes in nearly each nook in Latin America, controlling a mixed 60% of the home markets in Colombia, Chile and Peru. However Avianca pulled out of Peru in May, calling the home market unprofitable, surrendering to LATAM, which has dominated journey there because the 1990s. Slideshow (2 Pictures)LATAM, in flip, departed Argentina earlier this month after shedding an amassed $350 million since 2012. What it exhibits is airways keen to give up market share that they fought onerous in regular instances to take care of. “To talk about competition in this context makes no sense, this is a fight for survival,” Bain’s Castellini stated. “Airlines are going to prioritize their survival over their market share.” Reporting by Marcelo Rochabrun in Sao Paulo; Further reporting by Tracy Rucinski in Chicago and Tatiana Bautzer in Sao Paulo; Modifying by Christian Plumb and Matthew LewisOur Requirements:The Thomson Reuters Belief Rules.