Colombian Regulators Give Avianca 5 Days To Decide Fate of Viva

Early yesterday morning, Colombia’s civil aviation regulator Aerocivil announced some flexibility with regards to its rulings on the potential merger of airlines Viva and Avianca, though it is holding firm on its opposition to potential route dominance that it says would be created by the merger in Bogotá’s congested El Dorado International Airport.

Just over a year ago, the integration into a holding company was announced where Avianca shareholders purchased Colombian low-cost carrier Viva Air from Irelandia Aviation and several minority shareholders. The problem was the deal ended up being rejected by Colombian regulators after it was a fait accompli. This left Viva without access to capital and the airline ended up having to shut down at the end of February, 2023.

The Colombian government then said that the merger could take place, but only under certain conditions, the most noxious for Avianca being that the combined entity would have to cede many of its prime slots (takeoff and landing rights for a specific time) at Bogotá’s El Dorado airport. Avianca has publicly resisted this condition, hinting that it would rather abandon Viva to oblivion (thus eliminating what was its strongest competitor) than cede those slots to other airlines.

In yesterday’s decree, Aerocivil announced that:

1. Taking into account the motions and appeals of Avianca, Viva, Wingo, Ultra Air, Latam, JetSmart (all airlines active in Colombia), and the Colombian attorney general, it approves the integration of Avianca and Viva while modifying certain conditions.
2. The conditions indicated in Resolution 00873 of May 5, 2023 establishes among other things, such responsibilities of the integrated entity:
   1. That the rights of Viva air users are respected and attended to, that tickets for canceled flights are reimbursed, or that the passengers are permitted to fly on upcoming flights.
   2. The return of takeoff and landing slots, adjusting to such a manner that uses most efficiently the infrastructure of the El Dorado International Airport, guaranteeing competitive conditions and the permanence of Viva Air.
   3. Maintain Viva Air’s low cost scheme as an option that gives air transportation users an alternative, especially in routes where it is the only airline operating.
   4. The return of flights between Bogotá and Buenos Aires (Argentina), which were particularly impacted by the transaction, protecting the rights of the passengers, and without affecting the seat offering (availability of passenger capacity), opening the possibility to other operators when they manifest interest.
3. The secretary of the aviation authority resolved in an expedited manner the legal obligation to analyze and answer each and every argument in the brief term of 7 business days after receiving orders from the air transport and commercial aviation directorate. (This is the agency making a defense of itself in the face of criticism that it took too long to make a decision, leading to the insolvency of Viva.)
4. In confirming with the above, from the execution of Resolution 00873 of May 5, 2023, the integrated entity (Viva + Avianca) will have 5 calendar days to communicate to the country, to the users and to this aviation authority its final decision to implement or not its integration.

Stay tuned for the final decision that must be made public by Avianca & Viva by the end of this week. Be sure to subscribe to Finance Colombia for the latest updates.