Skift Travel News Blog

Whether Viva Air will ever fly again is increasingly an open question. Avianca, which wants to merge with the bankrupt budget carrier, said late Wednesday that the conditions laid out by Colombian civil aviation regulators for the deal “make Viva’s recovery impossible.”

“Several conditions that, depending on the case, (i) make Viva’s operation unviable in the medium term, sentencing it to operational and financial failure (e.g. lack of slots), (ii) are impossible to comply with, given the current reality of that company, which has already lost more than half of its aircraft (e.g. the requirement to maintain capacity on exclusive routes despite the lack of aircraft and slots), or (iii) grant unjustified benefits to third parties (e.g. requiring Avianca to pay for Satena’s IOSA certification).”

— Avianca in its response to regulator Aerocivil’s tentative approval of the merger

The Bogotá-based Star Alliance carrier added that the conditions were “unfeasible” for the deal to move forward.

Aerocivil’s conditions include divesting slots at Bogotá’s congested El Dorado airport, reviving the Viva Air brand, honoring the tickets of travelers affected by Viva’s shutdown, and maintaining a codeshare with Colombian regional airline Satena.

Avianca first acquired Viva in mid-2022, and then announced plans to merge with the Colombian discounter — but maintain it as a separate brand — last August. What’s followed is a telenovela of twists and turns including allegations of antitrust violations by Avianca, 11th hour interference from competitors, and mixed messages from Aerocivil.

What happens next is anyone’s guess. Viva closed its doors two months ago at the end of February and, as Avianca, points out, aircraft leasing companies have already begun taking back aircraft. Latam Airlines has begun offering former Viva staff jobs at its own growing Colombian subsidiary. And competitors, including Chilean discounter JetSmart and Copa Airlines-owned Wingo, have outlined plans to expand in the domestic Colombian market.

Aerocivil has said that Avianca, and other “interested parties” — including JetSmart, Latam, and Wingo — have 13 days to respond to its tentative approval. Only then, under the current timeline, could it finalize its approval and the deal close.

South America’s Avianca has rolled out a subscription program just for businesses.

The Colombian airline has partnered with Caravelo, a company that builds subscription platforms for airlines. The new program follows a similar tie-up it announced with Europe’s Wizz Air earlier this month.

Avianca Access differs, however, as it’s targeting corporate travelers only, who gain access to potentially cheaper travel without their employers having to commit to an annual quota.

There are four schemes: Access 10, for 1 to 10 travelers, which costs $10 a month or $96 a year; Access 25, for 11 to 25 travelers (at $25 a month); Access 50, for 26 to 50 travelers ($50 a month); and Access 100, for 51 to 100 travelers ($100 month.)

Employees can make unlimited date or hour changes without any penalty.

“I am happy to confirm that business-to-business-travel subscriptions are now a reality, and we have worked with Avianca to create the world’s first airline subscription program aimed at small and medium enterprises,” said Inaki Uriz, CEO of Caravelo.

The company added it had not yet been publicly launched by the airline, but has been operational since November 2022.

A public launch is expected later this year.

Avianca is currently looking to merge with Viva Air.

The potential merger of Avianca and Viva Air took a small step forward Wednesday when the former partially accepted the conditions laid out by the Colombian government for the combination of the country’s largest and third largest airlines.

While Avianca accepted regulator Aerocivil’s passenger protection provisions, including guaranteeing refunds for all travelers affected by Viva’s closure, it asked for “clarifications and minor modifications” to other conditions. The Star Alliance carrier asked that the remaining provisions, which include giving up slots at Bogotá’s congested El Dorado airport and committing to operating certain routes, reflect the “reality of the current market and to the operating conditions currently available to Viva.”

The latter point referred to Viva’s shutdown in February and subsequent repossession of several of its planes aircraft leasing companies. Then in March, budget competitor Ultra Air also shutdown, which upped pressure on the government to bring some budget airline capacity back to the Colombian domestic market, which had fully recovered to 2019 traveler numbers by October.

Avianca and Viva have called for “quick solutions” from Aerocivil in its response.

Competitors JetSmart and Latam Airlines, however, have appealed Aerocivil’s tentative approval of the merger. Both have previously expressed interest in acquiring the assets of Viva, which would give JetSmart its first domestic operation in Colombia and Latam a larger presence.

Latam, Avianca’s main competitor in South America, said Tuesday that it is seeking additional slots at the Bogotá airport from the merger. It added that, since Viva and Ultra shutdown, it has added five aircraft to its Colombian operation and increased the number of seats by 20 percent. Latam is backed by Delta Air Lines and Qatar Airways.

JetSmart, for its part, received a local operating certificate in March to begin domestic flights in Colombia. The Chilean discounter’s owners include U.S. private equity firm Indigo Partners and American Airlines.

The responses this week are the latest in what has turned into something of a soap opera over the future of the Colombian aviation market, which is the third largest in Latin America. Avianca, in the course of its takeover, may have violated local antitrust law after it took economic control of Viva last year and then, reportedly, installed a board to oversee the business that had its interests in mind. The airlines first sought approval to merge in August, a request that Aerocivil denied in November, and then reopened in January.

The Avianca-Viva merger is separate from Avianca’s plan to merge with Brazil’s Gol to create the new Abra Group.

Struggling Colombian budget airline Viva Air stopped flying late Monday, less than a month after it filed for the local equivalent of bankruptcy.

The Medellin-based carrier, and Colombia’s third largest, cited the delay by the country’s civil aviation regulator, Aerocivil, in approval of its proposed merger with Avianca for its closure. Aerocivil has been considering the airline’s merger, which former Viva CEO Felix Antelo said last year was critical to the airline’s future, for nearly seven months.

“Unfortunately, we are at this point due to the repeated delays of the [Aerocivil] and their inability to recognize that what is best for Viva is also the best for all Colombians,” Viva said in a statement. “We remain hopeful that [Aerocivil] will take immediate action to ensure that Viva continues to paint the skies yellow.”

Aerocivil first rejected Avianca and Viva’s merger request in November due to competition concerns. The regulator reopened the review in January after Avianca and Viva offered concessions to preserve competition. However, after JetSmart and Latam Airlines expressed interest in acquiring Viva, Aerocivil postponed a decision on the merger earlier in February.

Viva said that it will continue talks with creditors with the hopes it can restart operations in the future.

It may be a full on bidding war for bankrupt Colombian budget airline Viva Air. Latam Airlines has expressed interest in acquiring the carrier, joining Chile’s JetSmart, and put Avianca in defense mode over its proposed merger with Viva.

“The ‘proposals’ of the competitors that have expressed their alleged interest in Viva are, by all accounts, unfeasible, late and seem more of a distraction in the face of the request for integration of Avianca and Viva,” Bogotá-based Avianca said Wednesday. The airline acquired a controlling stake in Viva earlier this year but, as yet, its proposed merger with the discounter has been blocked by Colombian regulator, Aerocivil.

Aerocivil took a second look at the Avianca-Viva deal in January after the airlines offered to divest slots in Bogotá, among other conditions, in order to preserve competition. The regulator tweeted on February 10 that it anticipated a “prompt” decision on the proposed merger following Viva’s filing for the Colombian equivalent of bankruptcy.

Avianca’s comments Wednesday came after Latam said the day before that it had sent an expression of interest to acquire Viva to the airline’s management and shareholder Castlesouth Limited.

“We consider that this potential acquisition would be the best option to strengthen the conditions of the free market, as well as offer the necessary support to respond to the financial situation of Viva Air Colombia and its creditors, ultimately resulting in the strengthening of the Colombian airline industry,” Latam said.

Viva is Colombia’s third largest airline. In the first quarter, Viva is scheduled to fly nearly 17 percent of all seats in the country, according to Diio by Cirium schedule data. Avianca will fly 43 percent and Latam nearly 21 percent. JetSmart currently does not have a domestic operation in Colombia, but serves the country from Chile.

The potential bidding war for Viva comes amid a wave of potential airline consolidation in Latin America. Avianca is separately in the process of merging with Brazil’s Gol to form the new airline holding company, Abra. And Brazil’s Azul tried unsuccessfully to acquire Latam in 2021.

Struggling Latin American discounter Viva Air has entered the local equivalent to bankruptcy protection under Colombian law, as it works to restructure debt while awaiting a decision on its proposed merger with Avianca.

The Medellin-based airline said Friday that it had filed for Colombia’s Business Recovery Process, or known locally as PRE, to restructure its debt following challenges related to the Covid-19 pandemic and the delays in approvals to its combination with Avianca.

“The company has not been able to access capital during the last nine months since it has not yet been able to finalize its merger with another airline, which is still pending authorization from the national government,” Viva told Reuters.

Viva flights continue to operate as normal as the carrier begins restructuring, flight tracking website FlightRadar24 shows.

Viva CEO Felix Antelo told Airline Weekly in October that the merger was necessary for the airline’s continued survival. He noted that the deal would provide the budget carrier with the “financial muscle” to expand its low-fare model to more travelers.

Avianca and Viva announced plans to merge in August, after the former took a controlling stake in the latter earlier in 2022. However, Colombian regulator, Aerocivil, blocked the combination on competitive grounds in November. Aerocivil reopened the case in January after Avianca and Viva — Colombia’s first and third largest airlines — offered concessions to promote competition in Colombia.

And Chile-based budget airline JetSmart made a competing offer earlier in February to take full control of Viva.

Aerocivil tweeted Friday that it was advancing with “technical and legal rigor” its evaluation of the proposed Avianca and Viva merger, and anticipated a “prompt” decision on the matter.

Colombia’s civil aviation authority, Aerocivil, is taking a new look at the proposed merger of Avianca and Viva Air following what it described as a “substantial irregularity” in its initial review. That process, which concluded in November, rejected the airlines’ combination due to competition concerns.

Aerocivil notified the airlines Thursday that it would “proceed quickly” to review the proposed deal again. The regulator did not say whether the process would take into account the concessions, including a commitment to keep the Viva brand and giving up slots at Bogotá’s congested El Dorado airport, that Avianca and Viva offered in November.

“Staying independent in aviation in the 2020s is not an option,” Viva CEO Felix Antelo said on the importance of the merger in an October interview. “It was hard pre-pandemic. It’s not an option now.”

Avianca and Viva would together operate a 61 percent share of seats in the Colombian market based on 2022 numbers, according to Diio by Cirium schedules. The next largest carrier, Latam Airlines, had a 24 percent share of seats.

The proposed merger is a precursor to a much bigger deal: the combination of Avianca and Brazil’s Gol under the new Abra Group banner. The two airlines plan to maintain separate operations but say the deal would allow them to realize other operational and backoffice synergies, for example placing joint aircraft orders. Abra would be akin to an Air France-KLM or International Airlines Group of South America, and challenge to regional market leader Latam.

The Avianca and Viva Air merger has hit a major roadblock with Colombian authorities objecting to the proposed combination. The move could be a blow to Avianca’s plan to create a pan-South American airline group with Brazil’s Gol.

Colombia’s Civil Aeronautics Authority, or Aerocivil, said Tuesday that the merger of the country’s first and third largest airlines could reduce competition and hurt consumers. It could also increase the barriers faced by competitors in the market. In addition, Aerocivil said the financial situation at Viva Air, which the airline’s claimed required expedited approval of the merger, was not so bad as to “affect its viability in the market.”

“We are concerned about the direction of the decision, as it … ignores the potential effect that the disappearance of Viva would have on users and the market,” Avianca CEO Adrian Neuhauser said in a statement on the decision. “At Avianca, we reiterate our willingness to actively participate in rescuing Viva.”

Avianca first announced plans to acquire Viva Air, but not merge with it, in April. However, in August the airlines requested expedited antitrust approval from Aerocivil for a merger that was “vital for the sustainability and development” of Viva Air. In an October interview, Viva Air CEO Felix Antelo said the airlines planned to continue operate as separate brands but would coordinate schedules and fares in order to offer travelers better flight options.

“It will provide for us a financial muscle way stronger and better than what we had before,” he said. “We are going to keep the [low-cost] model around, we’re going to keep the brand around, [and] we’re going to keep the low fares around.”

Antelo also said that “staying independent in aviation in the 2020s is not an option.”

The Avianca-Viva Air merger is the first step in the creation of Abra, a new South American airline holding company created by the merger of Avianca and Gol. The group also has the option to take at least a 42 percent stake in Chile’s Sky Airline.

Aerocivil said it would reconsider the deal if Avianca and Viva resubmit their merger application and offer “remedies” to boost competition.

Updated with comment from Avianca CEO Adrian Neuhauser

Colombian budget airline Viva Air has officially applied to regulators to become part of Abra, the new airline group being formed by the merger of Avianca and Gol.

Under plans unveiled in May, Viva would become one of four airlines in Abra if its joint application with Avianca to Colombia’s civil aviation regulator, Aerocivil, Monday is approved. Avianca and Viva announced plans to combine but continue to operate separately shortly before the Abra deal.

Abra aims to become a multinational South American airline group akin to International Airlines Group or the Lufthansa Group in Europe. The four-way merger would create a regional competitor Latam Airlines Group, which is the largest in South America. Recently restructured Avianca and Gol in Brazil will be the anchor airlines of Abra and joined by Viva, as well as a minority stake in Chilean discounter Sky Airline. Together, the carriers would have significant shares in the Brazil, Chile, Colombia, Costa Rica, El Salvador, and Peru markets.

“The rapid approval of this integration and therefore the incorporation of Viva into Grupo Abra is vital for the sustainability and development of our company in the future,” Grupo Viva CEO Félix Antelo said in a statement translated with Google Translate.

Antelo did not mention a timeline but asked Aerocivil for a “prompt” decision. The application comes a day after Colombia’s new leftist president, Gustavo Petro, was sworn in to office.