The aviation market in Colombia is set for a shake-up after the country’s flag-carrier Avianca agreed a deal with ULCC Viva.

As part of the transaction, the two airlines will become part of the same holding company and Viva founding partner Declan Ryan will join the board of directors of Avianca.

Avianca will assume operational and financial control of Viva and its Colombian and Peruvian subsidiaries providing approval is granted by the relevant authorities. Until then, the carriers said they would continue to operate independently. The parties have not disclosed the financial details of the proposed arrangement.

“This new and robust group of airlines will benefit customers by using a more efficient cost structure to offer lower fares, a route network that delivers direct connections between destinations, a strong loyalty program, and friendly and efficient service,” Avianca’s main shareholder and chairman Roberto Kriete said.

Avianca emerged from Chapter 11 bankruptcy protection in late 2021 after restructuring its business model to compete more effectively against low-cost operators in Latin America.

The airline has started 2022 in robust fashion, announcing plans in March this year to order 88 Airbus A320neos with purchase options for 50 additional aircraft. Many of its routes have also been restored and new services are in the pipeline as part of efforts to launch 50 routes in three years.

Meanwhile, Viva has continued to expand during the pandemic, increasing its domestic and international footprint. The airline’s “Hub Medellín” project hopes to make air connections from the city as important as ones from the capital Bogota (BOG).

In recent months, the carrier has unveiled plans to enter Brazil’s market with flights from Medellín (MDE) to São Paulo/Guarulhos (GRU) starting in June, and will begin its inaugural routes to Argentina during the same month by offering connections from MDE and BOG to Buenos Aires’ Ezeiza International (EZE).

“This is an important day for Viva as it is the perfect scenario to continue with our growth and expansion strategy, staying true to our goal of inclusiveness in air travel,” Viva founding partner Declan Ryan said.

“If the authorities approve the management of both groups under the same holding company, it will encourage the growth of the air transport market, promoting low rates for users and good service with the best punctuality, allowing everyone to fly with a world of destinations.”

A statement issued by Avianca said that if approval is forthcoming, the shareholders anticipate that both airlines would become part of the same holding company but maintain their individual brands and strategies.

“Potential approval of a full combination will provide both Avianca and Viva with more financial stability allowing them to accelerate investment, innovation, and growth,” the statement added.

Data provided by OAG Schedules Analyser for the week commencing April 25 shows that Avianca accounts for 44.1% of departure seats from and within Colombia, making it the largest carrier by capacity. About 441,480 seats are available during the week.

Viva is the country’s third-largest operator with a 17.9% capacity share and 179,352 available weekly seats. LATAM Airlines Group is second, accounting for 22.5% of the market.

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The OAG data also shows that Avianca is currently operating about 86% of the capacity offered during April 2019, but the number of seats being offered by Viva’s Colombian AOC has almost doubled. Figures for April 2022 show 844,684 seats are available across the month, compared with 427,320 during the same period three years ago.

Looking at the respective carriers’ networks, Avianca currently flies 38 domestic routes in Colombia and 88 international sectors, while Viva offers 45 in Colombia’s market and eight international services. Analysis of the data reveals that the two airlines compete directly on 25 domestic routes in Colombia and six of Viva’s eight international flights.