Colombian Regulator Rejects Avianca-Viva Air Merger

DALLAS - The Colombian civil aviation authority, Aerocivil, has blocked the planned merger between Avianca (AV) and Viva Air (FV), citing that the tie-up would harm competition and create a monopoly in the country.

Avianca and FV offer 59 domestic routes, mobilizing 93.7% of Colombia's traffic. The merged company would control 16 of these routes, according to Aerocivil.

Aerocivil stated that the integration of the two carriers, along with FV's Peruvian subsidiary, poses "risks for competition in the sector and the welfare of consumers," and that other airlines would face "new difficulties" in growing or entering markets due to the combined entity's dominance.

Aerocivil concluded that consumers could be harmed "to the extent that the integrated entity (AV, FV, and Viva Peru) would have more facilities, incentives, and fewer risks by increasing its prices, reducing frequencies, canceling routes or reducing complementary services.”

Viva Aerobus XA-VII Airbus A320Neo. Photo: Andrew Henderson/Airways

Background

In April, Avianca announced plans to acquire ULCC Viva but that it would keep the two carriers separate. However, in August, the airlines asked the Colombian aviation authority for expedited antitrust approval for a merger, claiming that the integration was critical due to Viva's difficult financial situation.

Aerocivil ruled in its objection to the proposed tie-up that AV and FV had not proved that Viva's economic crisis was of such magnitude that it would affect its viability to continue operations.

Aerocivil also stated that FV had not explored and exhausted other alternatives, such as applying for loans or seeking out other potential investors.

Furthermore, Aerocivil stated that both companies failed to demonstrate that the transaction would cause less harm to competition in the sector than FV's exit from the market.

The arrival of the airline's first A320neo signaled a new livery and branding for Viva Air in 2021. Photo: Viva Air

Comments from Avianca CEO

Following the ruling, Avianca president and CEO Adrian Neuhauser said the airline was “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.”

“At Avianca, we reiterate our willingness to actively participate in rescuing Viva, seeking to maintain connectivity for travelers, strengthen tourism and preserve formal employment,” added the CEO.

The Star Alliance member said it would evaluate all available legal alternatives to seek the necessary approvals and that the merger with FV was unrelated to its plans to establish a new holding company called Abra Group.

Avianca has been the flag carrier of Colombia since December 5, 1919, when it was initially registered under the name SCADTA. AV and its subsidiaries have the most extensive network of destinations in Latin America.

This is a developing story.

Featured image: Avianca N793AV Boeing 787-8 Dreamliner. Photo: Lorenzo Giacobbo/Airways