Avianca Raises Doubts Over Viva Rescue
Conditions imposed on the Avianca-VIva merger include the return of slots at Bogota El Dorado and placing a fare ceiling on certain routes.
Colombia's Avianca has rejected the terms laid out by the country’s civil aviation regulator Aerocivil for its proposed merger with Viva, saying that the conditions are “unfeasible.” Avianca warned that the rescue of Viva may no longer be possible.
Aerocivil granted final approval for the integration of the airlines on April 25 on the basis that Avianca meets a series of requirements set out in a preliminary decision in March. However, Avianca has claimed that the measures are “impossible to comply with” and would “condemn” Viva to financial and operational failure.
The conditions stipulated by Aerocivil include the return of sought-after slots at Bogota El Dorado International Airport for both summer and winter seasons. Additionally, Avianca is required to uphold Viva’s ULCC business model, enhance the frequency of flights between Bogota and Buenos Aires, issue refunds for canceled Viva flights and establish a fare ceiling on routes where the integrated entity is the sole operator.
Avianca said in a statement that the proposed terms are not viable, emphasizing that Viva has already experienced a significant loss of aircraft, hindering its ability to sustain capacity on exclusive routes. The Star Alliance member further argued that the conditions would result in “unjustified benefits” being granted to third parties, including Bogota-based Satena.
Avianca has been actively pursuing the acquisition of Viva for the past year. However, the process has been delayed by a series of regulatory hurdles, including Aerocivil rejecting the deal in November 2022 amid concerns the tie-up would damage competition and create a monopoly on 16 domestic routes.
Following financial challenges stemming from fuel-price fluctuations and currency devaluation, Viva entered into a voluntary 90-day restructuring process in February 2023. Later the same month, CEO Felix Antelo stepped down and all flights were grounded.
Avianca noted that this restructuring period—which provides protection from creditors—ends on May 9, making the rescue of the company “less and less viable.” It also pointed out that there is an increasing risk that lessors will withdraw the aircraft that the airline has left.
“Every day that passes in the process is one day less for Viva, for its workers and for the entire value chain associated with its existence,” Avianca said, urging authorities to reconsider the conditions placed on the proposed merger.
At the beginning of 2023, Viva operated about 22 Airbus narrowbodies. The CAPA Fleet Database shows the airline has 10 A320neos parked at present.
Viva is not the only low-cost Colombian to have grounded flights this year. On March 29, startup Ultra Air ceased operations following a cash crisis. The demise came just over a year after the ULCC launched commercial flights.
The grounding of Ultra Air and Viva has seen seat capacity in Colombia’s domestic market shrink by about 21% since the turn of the year, analysis of OAG Schedules Analyser data shows. For the week commencing April 24, there are about 719,000 domestic seats available, down from more than 900,000 during the first week of 2023. In January, Viva’s share of the market was about 17.3% and Ultra Air’s was 5.6%.
However, their absence in the market looks set to be replaced by ULCC JetSMART, which has started the process to launch a domestic carrier in Colombia, adding to its airlines in Chile, Argentina, and Peru. JetSMART hopes to launch the new airline before the end of the year.
This article was originally published on aviationweek.com.