United Airlines – the wholly-owned subsidiary of United Continental Holdings Inc. UAL – recently decided to spend nearly $100 million for a 5% stake in Brazil’s third-largest carrier, Azul Brazilian Airlines.
The deal will help United Airlines gain a position in Azul's board apart from allowing both the carriers to expand their network through a codeshare partnership.
This latest collaboration will also allow Azul to place its code on United Airlines’ North America and Caribbean routes while United Continental will be able to assign its code on Azul-operated flights from Guarulhos to major cities in Brazil as well as to Florida.
From now on, both the carriers will offer passengers with more options in the U.S.-to-Brazil route. Apart from the extended and seamless connectivity between flights, customers will also enjoy easy one-stop ticketing, more flying options and better baggage check-in facilities. Moreover, customers of both the carriers will earn frequent flyer points while booking tickets.
Airline partnerships are a strategic key to a carrier’s growth prospects as they provide expansion opportunities without the need for heavy investments. Thus, the pact extension deal will help both United Continental and Azul to enhance their services by controlling costs and availing travel benefits.
Hence, we believe that such tie-ups with leading carriers will significantly enhance the in-flight experience for passengers apart from enhancing the carriers’ network and revenues.
United Continental currently carries a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the same space include Deutsche Lufthansa Aktiengesellschaft DLAKY, SkyWest Inc. SKYW and JetBlue Airways Corp. JBLU. JetBlue carries a Zacks Rank #2 (Buy) while the other two companies sport a Zacks Rank #1 (Strong Buy).
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