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United Continental Holdings Inc. and Delta Air Lines Inc. are among suitors considering bids for Avianca Holdings SA, according to people familiar with the matter, as airlines around the world seek combinations to help them withstand fierce competition and bulk up internationally.

Advisers to Avianca have distributed a document to potential bidders seeking a $500 million capital injection, one of the people said, adding that could develop into a full sale. The process is in early stages, the people said, and there may be no deal at all.

Avianca, one of the largest airline companies in Latin America, is based in Panama and owns carriers including its Colombian namesake and Tampa Cargo SA in that country, and AeroGal in Ecuador. In 2010, Avianca merged with Grupo Taca, which had airlines in El Salvador, Costa Rica, Peru, Nicaragua and Honduras. Avianca went public in 2011 and has a market value equal to roughly $600 million.

Should there be a deal for Avianca, it would be the latest in a recent string of airline tie-ups. The pace of consolidation in the industry has quickened in recent years, particularly in Europe, the U.S. and Latin America, as carriers seek to bulk up and broaden their scope amid stiff competition. In the U.S. alone, eight airlines have merged into four since 2008 and those four control more than 80% of domestic capacity. In Latin America, there also have been some big mergers, including the 2012 joining of Chile's Lan and Brazil's Tam—in addition to the marriage of Avianca and Taca.

As Latin American carriers have developed and some local economies improved, U.S. airlines have been picking partners and trying to lock in relationships. American Airlines Group Inc., the leading U.S. carrier to the region, benefits from its relationship with Latam Airlines Group SA, formed by the merger of Lan and Tam.

Avianca had revenue of $4.7 billion in 2014. Profit, excluding foreign exchange and fuel-hedging charges, was $120 million. As of September 2015, the company had debt of $3.3 billion.

It serves more than 100 destinations in 26 countries, with 176 airplanes operating 5,400 weekly departures, according to a December 2015 corporate presentation. Avianca has hubs in Bogotá , Colombia; San Salvador, El Salvador; and Lima, Peru.

The group also runs a loyalty program, a logistics business, airport and maintenance services and runs tours. It sold a 30% stake in the loyalty business to a private-equity investor last year.

Avianca named Herná n Rincó n Lema, a Microsoft Corp. executive in Latin America, as its new chief executive in March to replace an interim CEO who had stepped in after longtime chief Fabio Villegas resigned in January.

The family of Germá n Efromovich, a Bolivian-born entrepreneur, owns just over half of Avianca through a holding company called Synergy Group, with the Kriete family that controlled Taca holding 14.5%.

A majority of the Avianca common stock owned by Synergy has been pledged to secure loans, according to a regulatory filing. Mr. Efromovich, who has interests in businesses including oil-and-gas exploration, hydroelectric power plants and telecommunications infrastructure, started investing in airlines several years ago.

Avianca is the second-largest carrier in South America after Latam, which also has airline affiliates in Peru, Argentina, Colombia, Ecuador and Paraguay. Latam is a member of the Oneworld alliance anchored by American and the parent of British Airways and Iberia of Spain.

Both United Continental and Delta could have reasons to want to explore a deal with Avianca. United Continental lost its largest Star Alliance member in the region when Tam merged into Latam, leaving a hole in its network. Last year, United invested $100 million for a 5% stake in Brazil's No. 3 carrier, Azul Linhas Aereas Brasileiras SA.

In 2012, the Taca brand went away and Avianca became the single brand for all the airlines in the group. The companies joined the Star Alliance, a global marketing group anchored by United and Deutsche Lufthansa AG, in 2012.

Delta has arguably been the most active in looking for deals to strengthen its international business. In 2011, it took stakes in Gol Linhas Aereas Inteligentes SA, one of Brazil's biggest airlines, and Grupo Aeromexico SAB, the big Mexican carrier. Since then, Delta has boosted its AeroMexico stake and is on track to raise it further, to 49%. Delta has also indicated it may add to its Gol ownership.

Write to Dana Mattioli at dana.mattioli@wsj.com, Liz Hoffman at liz.hoffman@wsj.com and Susan Carey at susan.carey@wsj.com

(END) Dow Jones Newswires

June 02, 2016 21:05 ET (01:05 GMT)

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