Colombia’s Civil Aviation Authority has decided to annul the first rejection of the merger proposal by Avianca and Viva, possibly helping the ultra-low-cost carrier, which is struggling financially, according to reports by both companies.
Merger annulled
On Thursday, it was reported that Colombia’s authorities have formally annulled the first rejection of the merger procedure between Avianca and Viva after finding “procedural irregularities.” The government will review Viva and Avianca's proposal a second time, in an urgent manner, it announced. Colombia’s newspaper Portafolio first reported on the annulment.
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On November 4, 2022, Colombia’s authorities dealt a first blow to the merger plans after rejecting the first proposal, filed under the terms of “exception for a company in crisis.” It said that the integration posed “risks to competition in the sector and consumer welfare” and urged both companies to file a new proposal, which they did a few days after.
Avianca and Viva offered a five-point plan, including the return of up to 105 slots at Bogota El Dorado International Airport (BOG), and were reportedly “open and willing to contribute to strengthening Colombia’s air market.”
The merger between both companies has created lots of controversy in Colombia. Ultra Air, an ultra-low-cost competitor in the region, has been the most vocal company against the integration plans of Avianca and Viva, stating that it would create a monopoly.
What happens now?
This new announcement could mean the survival of Viva, an ultra-low-cost carrier that has grown fast in the last few years, launching routes across the Americas employing an Airbus A320-family-based fleet. Nonetheless, Viva’s growth, plus the economic uncertainty and rising fuel prices in Colombia, have put the airline in a financially tough spot. Avianca has said that a merger is the only way to ensure Viva’s continuity and avoid an impact on the domestic aviation market.
Last month, Viva showed a glimpse of the true extent of its crisis. The ultra-low-cost airline returned two Airbus A320neos, registrations HK-5389 and HK5378, to VMO Aircraft Leasing and are currently stored at Tucson International (TUS) in Arizona.
Simple Flying reached Viva and Avianca for comment. At the moment of publishing this article, Avianca hadn't formally issued a statement on the subject. Viva said in a statement sent to Simple Flying,
"The decision to nullify the process by which the integration with Avianca was denied in the first instance in order to guarantee due process leaves a glimmer of hope for Viva's permanence in the market and to obtain a positive response to this request in the short term."
The airline added that approving the merger would be the best decision, as it would Viva remain in the market. Nonetheless, Viva is currently against the clock, and it is urging the Colombian authorities to review the proposal again shortly. The airline has cash constraints and every day that goes by puts Viva in a tougher spot and at risk of not being able to carry the 25,000 daily passengers it handles to its 28 destinations across the region.
Does this impact the Abra Group Limited?
Simultaneously with its merger plans with Viva, Avianca is currently in the process of launching Abra Group Limited with Brazil’s GOL Linhas Aéreas. This holding would encompass both companies plus a minority stake in Chile’s Sky Airline. It could also include Viva Colombia and Viva Peru, but that’s dependent on whether the integration to Avianca is first approved. If not, it will not derail the Abra Group process.
Last month, Avianca’s CEO, Adrian Neuhauser, said that the holding had been approved by Brazilian and US authorities. Both companies lack a shareholding agreement currently and are negotiating certain financing issues before they formally announce the launch of the holding.
Do you think Avianca and Viva should continue with their merger proposal? Let us know in the comments below.
Source: Portafolio
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Avianca
- IATA/ICAO Code:
- AV/AVA
- Airline Type:
- Full Service Carrier
- Hub(s):
- El Dorado International Airport, El Salvador International Airport
- Year Founded:
- 1919
- Alliance:
- Star Alliance
- Airline Group:
- Avianca Group
- CEO:
- Adrian Neuhauser
- Country:
- Colombia
- Region:
- South America
