Colombia-based Viva Air initiates restructuring process
Colombia-based low-cost carrier Viva Air has initiated a Business Recovery Process (Proceso de Recuperación Empresarial, PRE), as it awaits a decision from the Civil Aviation Authority of Colombia (UAEAC) regarding its merger with Avianca.
Viva Air announced the PRE on February 10, 2023, in order to achieve “its permanence in the market, pending the urgent definition by Aerocivil about its alliance with Avianca”.
“This determination is given due to the crisis that it faces by adding to the effects of COVID-19 and the current macroeconomic factors that are publicly known,” the statement continued.
The low-cost carrier and Avianca, a Colombia-based full-service carrier, announced their intentions to merge in April 2022 once both airlines’ shareholders signed an agreement for Viva Air to hand over 100% of its economic rights in Colombia and Peru to Avianca.
In August 2022, Avianca learned about the difficult position of Viva Air and asked the UAEAC to accelerate the merger approval process to “make the permanence of the low-cost airline viable for the benefit of passengers, connectivity in Colombia and Peru, as well as to safeguard jobs that directly and indirectly depend on Viva”.
The UAEAC objected to the merger in November 2022, citing competition and consumer well-being concerns. In response, Avianca’s President and Chief Executive Officer (CEO) Adrian Neuhauser stated that the airline is “concerned about the direction of the decision, as it goes against the needs of the country and ignores the potential effect that the disappearance of Viva would have on users and the market.” Neuhauser added that Avianca is willing to “actively participate in rescuing Viva, seeking to maintain connectivity for travelers, strengthen tourism and preserve formal employment.”
Taking advantage of voluntary restructuring
As such, Viva Air took advantage of “this voluntary recovery process that lasts 90 days, in order to restructure its debts through a negotiation with its main creditors to continue operating under sustainable conditions that guarantee the continuity of the company,” the airline said in its statement.
The low-cost carrier has waited six months for the local civil authority to authorize the merger. If approved, it would allow Viva Air to operate its low-cost flights in Colombia in partnership with a company that has a strong presence in the region, helping the no-frills airline preserve jobs and ensure connectivity.
“After studying all the available alternatives in the face of the current situation, we entered into this voluntary mediation process while we wait for the urgent decision by the authority of our alliance with Avianca,” Viva Air’s statement continued. “Just as we have adapted in the past, we are convinced that we will be able to overcome this situation for the good of all passengers who have benefited from the low-cost model in which we are experts,” the airline concluded.
Viva Air currently operates 11 Airbus A320 and 10 Airbus A320neo aircraft, according to planespotters.net.
Avianca has also established a joint holding company with Brazil-based Gol Linhas Aéreas Inteligentes called Abra Group. The two carriers will operate independently but will be owned by a United Kingdom-based company. The consolidation of the two has yet to be approved by regulatory authorities.