Avianca Defends Its Acquisition of Viva, Offers Concessions To Regulators

Avianca is struggling to keep its deal to purchase Viva alive, after resistance from government regulators, and practically all of its domestic competition. After Colombia’s civil aviation authority Aerocivil slowed the acquisition down, competitors Jetsmart and Latam have submitted offers for the company. The controlling shareholder, Castlesouth limited, is demonstrating alignment with Avianca, and publicly resisting these competing offers.

On the other hand, should Avianca succeed in its acquisition of Viva, competitors say that it could return Avianca to its position of market dominance that it enjoyed before Viva became a significant competitor, and the airline began to suffer from internal turmoil.

Wednesday, Avianca shared the following statement with Finance Colombia outlining concessions it is willing to make in order to consummate its deal with Castlesouth to acquire Viva. Finance Colombia has reached out to Castlesouth for comment through its legal and public representative, Philippi Prietocarrizosa Ferrero DU & Uría. So far the law firm has declined communication.

Avianca’s statement, translated by Finance Colombia:

After six months of having initiated the application process for Avianca and Viva to be part of the same business group, Civil Aeronautics requested adjustments to the conditions initially proposed. Faced with this, Avianca reiterated again before that authority a letter detailing deepening its five proposals that demonstrate the interest of maintaining balance in the market; the Viva brand and its formal jobs; the connectivity of the regions and the protection of thousands of passengers who fly through that airline.

The conditions submitted to the authority subject to the integration process are:

1. Decrease in participation in El Dorado: If Avianca and Viva are part of the same business group, they would deliver up to 105 slots, that is, takeoff and landing permits. With these spaces available in different time slots, which include those with the highest passenger traffic, any other airline that has aircraft and investment capacity, could operate up to 15 additional aircraft in El Dorado, the only airport in Colombia that today has restrictions that limit free entry to airlines that want to compete.
2. Survival of Viva: It would maintain the brand and its low-cost business model, jobs, aircraft and routes that Viva operates exclusively.
3. Protection of fares and/or frequencies: On routes in which Avianca and Viva together have a high participation as a result of the transaction, fares and/or frequencies would be protected, as the case may be.
4. Boosting Satena’s social role in regional connectivity: Offering Satena codeshares or interline agreements on routes where it is the sole operator, allowing passengers from the most isolated territories to connect with all destinations in Avianca’s network and strengthening its undeniable regional role.
5. Maintenance of Viva’s interline agreements: It will be guaranteed that foreign airlines that distribute their passengers through Viva can continue to do so and thus their guaranteed access to the Colombian market.

In this regard, Adrian Neuhauser, President and CEO of Avianca (above photo), said: “These proposals address the authority’s concerns related to protecting the air transport service, the balance of the market and its genuine purpose of taking care of Viva’s users and workers. We trust that the authority will approve the integration with conditions, allowing Colombia to strengthen tourism as an engine of development.”

Neuhauser added: “Today Colombia is already one of the most competitive markets in the world, with 10 domestic and 30 international operators. The essential thing in this discussion is not to weaken those actors who do seek to remain and connect Colombia.”

Avianca considers that the recent proposals of different competitors are technically unfeasible, since any takeover of Viva would require, once the purchase is agreed, approval processes in various countries that would take time that the low-cost clearly does not have. Therefore, we question the real intention of these ‘offers’ of actors who, after opposing integration for months and denying the existence of a crisis, today want to appear as saviors with ‘solutions’ that lack credibility.

The company trusts in the timely response of the authority to the integration process that began in August last year, seeking to prioritize the connectivity of the regions, the provision of air transport service and the preservation of formal jobs.