Avianca hesitates on decision to merge with Viva Air despite Aerocivil approval

Avianca is now deliberating whether to go ahead with its merger with Viva Air despite receiving approval from the Civil Aviation Authority of Colombia (Aeronáutica Civil de Colombia, Aerocivil) after the airlines agreed to concede to certain concessions.

The Colombian authority finally granted approval after a saga lasting several months, which included a denial of the request and a subsequent U-turn on the decision once Aerocivil found “substantial irregularity” in the decision. As such, the authority re-examined the decision and, on March 21, 2023, published a statement that it would approve the merger, given that the new entity would fulfill several conditions.

Those conditions included relief of certain slots at El Dorado International Airport (BOG) in Bogota, Colombia, the continuation of Viva Air’s low-cost model, fare cap on routes where Avianca-Viva Air would hold 100% of the market share, and a dynamic market on routes, where the new airline group would control the majority of the market.

In a response published on March 22, 2023, Avianca noted that “given the operational, financial, and technical implications of Aerocivil’s decision”, the Colombian airline “will study the resolution and the implications of the measures set forth by the authority as soon as possible to determine the feasibility of complying with them”. However, Avianca noted that Viva Air no longer has the same route network, fleet, or personnel that it had prior to its temporary suspension of flights on February 27, 2023.

As such, given Viva Air’s weakened corporate structure, Avianca added that this “must be analyzed in detail to determine the relevance of the conditions established by Civil Aeronautics”. Furthermore, since various parties, including those who are not directly related to the decision, such as LATAM, Wingo, Ultra Air, and Aerolineas Argentinas, can appeal, making the decision irresolute, “Avianca is not empowered to intervene in the operational or financial situation of Viva Air”.

Despite this, Avianca has offered customers affected by Viva Air’s flight suspension the opportunity to fly free of charge until March 24, 2023.

The two airlines announced their intention to merge in August 2022 following an initial shareholder vote on the matter in April of the same year. Subsequently, in November 2022, Aerocivil denied the merger, citing the anti-competitive manner of the consolidation of carriers in Colombia. However, in January 2023, the Colombian authority stated that following “substantial irregularity in the processing of the administrative action”, it will look into the merger once again, giving the green light for the two to merge on March 21, 2023.