Low-cost airline Flybondi eyes Brazil expansion after SPAC deal

Argentine low-cost airline Flybondi is considering an expansion into Brazil, a move that could eventually be financed through public markets once it completes a merger with a blank-cheque company in the first half of next year.

The company, which announced its plan to go public on the Nasdaq on October 20 through special purpose acquisition company Integral Acquisition Corporation 1, may not see immediate proceeds from the transaction but it would be a first step in being able to tap a broader group of investors down the line, said Chief Executive Officer Mauricio Sana in an interview.

“The move isn’t aimed at raising funds: we don’t need them, we haven’t asked for a capital injection in three years. And you never know how much you’ll get in the end,” Sana said on the sidelines of a conference. The benefit is that if next year Flybondi wants to upscale quickly “and our shareholders don’t necessarily want to give us more funds, we can do a follow-on round without having to wait a year to execute a business plan.”

That’s where a Brazil expansion could come in. The company is actively analysing the move, Sana said, but Brazil’s “aggressive” consumer protection laws and frequent fines for companies operating there are risks.

“We want to be in Brazil, and we’re working toward announcing our possible entry there next year,” Sana said. “But now we’re looking at regulatory issues. If that barrier is reduced, we’ll probably go forward, we’re working on it.”

The company already flies to Rio de Janeiro, São Paulo and Florianopolis from Argentina. An expansion would mean doing domestic routes within Brazil where Latam Airlines Group SA, Azul Linhas Aereas Brasileiras SA and Gol Linhas Aereas Inteligentes SA are dominant.

Buenos Aires-based FB Lineas Aereas SA began operations in 2018 when discount airlines were first allowed to fly in Argentina, increasing competition for state-owned carrier Aerolineas Argentinas. Flybondi’s market share for domestic routes is up to 22 percent and five percent for regional routes as of October, according to the latest government data.

The company is operating with 15 planes after doubling its fleet in 2022 and has plans to receive another before the end of the year. Four more planes should be added in 2024. Flybondi currently reinvests all profits to lease more planes, and flies to 18 domestic destinations.

SPAC move

Discussions for the SPAC merger began when Flybondi was approached a couple of months ago, Sana said. The timing of the announcement was related to the formal merger process and totally unrelated to political developments in Argentina. The country will hold a presidential run-off election on November. 19.

Integral Acquisition Corporation 1 currently trades under the ticker “INTE” and has US$12.9 million of cash in trust. Shares of the airline will be listed as “FLYB,” and the transaction is expected to close in the first half of 2024.

“It was very interesting to see that a SPAC associated to Nasdaq, technology and innovation came calling, because that means we’re leaving the corset of discussions on traditional airlines,” Sana said. “It shows we’re doing something right.”

Argentina has seen a dearth of stock listings in the past five years. Rosario-based biotechnology company Bioceres Crop Solutions Corp was the country’s last Argentina-based firm to go public, also through a blank-cheque company in 2019.

Other companies with Argentine founders but operations elsewhere, including Moolec Science Ltd and Satellogic Inc, have also turned to blank-cheque companies to list in the market.

Argentina election

Sana said he’s not concerned with the outcome of the presidential election between Economy Minister Sergio Massa and libertarian outsider Javier Milei.

One of the most drastic proposals discussed in the campaign has been Milei’s idea of dollarsing the Argentine economy.

“I don’t think a currency change would make a big impact in the airline sector,” he said. Due to costs in dollars, a dollarisation “could simplify some processes, discussions, probably even regulations. But the challenge is what happens to our customers’ wallets, to those who are used to flying with us.”