Colombian Civil Aviation Regulator — The Aeronáutica Civil de Colombia has approved, with some conditions, the merger between the Colombia’s flagship carrier Avianca and country’s low-cost airlines, Viva Air.
Among the requirements is to make adjustments to the "slots", that is to say that these airlines give up some of the times they have for the take-off and landing of aircraft.
Understandably, Avianca Group International Limited will create a new holding company with Declan Ryan, majority stakeholder in Colombia’s low-cost airline Viva, and thereby, preserve the financial autonomy of both companies, yet work together as a “new and solid group."
The sudden return of domestic tourism in Colombia with the departure of COVID-19 restrictions presented a roadmap for airlines to restructure their business models, attract capital finance and international investors, as well as embark on aggressive ticket pricing, and promotions, to maintain fleets commercially operational, and above all, competitive.
Despite that , both the airlines plan to keep their separate branding and business strategies. The synergy will offer more competitive pricing and explore growth opportunity following bankruptcy.
Earlier on November 4, 2022, Civil Aeronautics , in accordance with the preceding procedures, objected to the integration request in the terms that were presented to the body , considering it was against the free competition , and the condition of a company in crisis not being proven.
However, on January 18, 2023, through resolution 00079 of the Secretariat of the Aeronautical Authority of this Entity, it was ordered to redo the administrative action and establish as a procedure for this type of request, the one enshrined in Law 1340 of 2009 and concordant norms under the terms of consumer protection rules.
It was not easy a choice , as Avianca had to do this after exiting the Chapter 11 bankruptcy at the end of 2021 after completing a corporate restructuring. Presently, Avianca has more than 130 aircraft and over 12,000 employees for the operation.
Viva, which has operations in Colombia and Peru, has a fleet of 21 aircraft and around 1,000 direct employees. The carrier temporarily suspended its operations in February after its financial struggles left it unable to operate.
Worth mentioning , both LATAM Airlines and JetSMART Airlines had also expressed an interest in acquiring Viva. As per a latest market review at the end of January 2023, Latam had a 26% market share within Colombia. For its part, Viva Air held a 15% share.
Thus, the proposed merger with Viva Aircould have helped Latam reach a 41% share, eventually becoming the first operator in Colombia, even above Avianca, which is a thing of past , atleast for now.
After the new Avianca-Viva arrangement , the entity could include a code-sharing agreement between Avianca and Ryanair, as well as possible direct flight in the future between Bogotá and Dublin for Europe-bound passengers from South America, with access to Ryanair’s extensive European destinations covered by low-cost fares.
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