American Airlines has signed a Letter of Intent to take a minority stake in South American low-cost carrier Jetsmart.

AA said that the proposed partnership “would uniquely tie together the full-service, global presence of American with the complementary network of ultra-low-cost carrier Jetsmart in South America to offer competitive fares and expanded travel options for flyers throughout North and South America”.

Jetsmart (styled JetSMART) was founded in 2016 and is controlled by Indigo Partners, which also owns stakes in Wizz Air, Frontier Airlines, Volaris, Cebu Pacific and Canadian start-up Enerjet.

The ultra-low-cost carrier operates short-haul domestic and international services from Chile and Argentina to 33 destinations throughout South America, using A320 Family aircraft.

AA meanwhile currently operates to 17 destinations in South America, from its US hubs at Dallas Fort Worth, Miami and New York.

The deal would allow AAdvantage members to earn and redeem miles on Jetsmart flights, and a codeshare agreement is also proposed between the two airlines.

The transaction would see American invest in Jetsmart and take a minority stake, with the US carrier jointly committing with Indigo Partners to provide additional capital to fund potential future opportunities in the region.

The news follows last year’s joint venture agreement between US carrier Delta and Latin American carrier LATAM.

LATAM leaves Oneworld, signs trans-American joint venture with Delta

Commenting on the news Vasu Raja, American’s chief revenue officer, said:

“This proposed investment in Jetsmart would give customers access to the largest network, lowest fares and best travel loyalty programme in the Americas.

“This would enable Jetsmart and American to grow aggressively and profitably across Latin America as demand recovers, while preserving the best aspects of each carrier’s business model.

“This partnership would also make AAdvantage the largest travel loyalty programme in the Americas, creating more ways for customers to earn travel rewards and use their miles to access new destinations and elite benefits globally, no matter whether they earn in Latin or North America.”