Posted on: 26 April 2010
Jazz Air has announced today that it has agreed to invest $15 million in Latin American Regional Aviation Holding Corporation (LARAH) – the major investment vehicle behind Pluna Lineas Aéreas Uruguayas – in return for a 33-and-a-third percent non-voting equity interest in the company.
At the time of closing of Jazz’s investment, LARAH will hold an indirect 75% equity interest in Pluna. The remaining 25% equity interest in the carrier is held, indirectly, by the Government of Uruguay. Jazz’s $15 million investment, together with an additional $5 million which the Government of Uruguay has agreed to invest, will be used by Pluna to complete its business restructuring and to fund growth.
The completion of Jazz’s investment is subject to a number of closing conditions, including certain conditions relating to actions to be taken by the Government of Uruguay in connection with Jazz’s investment. At closing, a Jazz representative will be appointed to the seven-member board of directors of Pluna.
"This investment provides the potential for significant returns for Jazz," remarked Joe Randell, president and CEO, Jazz Air LP. "The South American air travel market is one of the world’s fastest growing and this investment provides Jazz with an exciting opportunity to participate in that growth. We chose to invest in Pluna because we see the value and opportunity in the niche markets they serve, and we believe they have a solid business plan.
“The new, state-of-the-art airport terminal in Montevideo; Pluna’s main hub, is a key component to the airline’s future success as it provides excellent connecting passenger facilities. Further, Pluna’s service extends beyond Uruguay to Argentina, Brazil, Chile and Paraguay and seeks to realise upon the growth potential in those markets. Jazz and Pluna have a common fleet type in the CRJ705/900 series regional jet, and both operate as regional carriers. We anticipate that our involvement with Pluna will produce other synergies that have the potential to create additional opportunities to generate value.
"Jazz has spent the last three years seriously considering and evaluating opportunities for diversification and growth, and we believe this transaction is another solid step in this direction," continued Randell. "Our recently announced new partnership with Thomas Cook Canada and the future addition of new Q400 NextGen turboprops that we’ll fly on behalf of Air Canada, were the initial steps taken to broaden our horizons. We’re confident in the Pluna team – the calibre of this group is second to none and we have great chemistry. We’re also grateful for the tremendous support we’ve received thus far from the Government of Uruguay and other interested parties."
"We are very excited about this new partnership with Jazz," commented Matias Campiani, chief executive officer of Pluna. "Not only will this investment facilitate our growth plans, we believe that Jazz’s operational expertise and experience will enable Pluna to realise upon synergies that will strengthen our business."
To assist Pluna with its growth plans and operations, a Jazz employee with significant operational experience is being seconded to Pluna for a minimum of one year as part of the senior management team. Cash distributions by the Jazz Air Income Fund are not affected by this development; funding for the investment is provided through general working capital.