9 airlines oppose the Viva-Avianca partnership

More and more airlines seem to oppose the partnership between Avianca and Viva. At least nine carriers have asked the Colombian authorities to be included as interested third parties in the ongoing process that could lead to the first step in the creation of Abra Group Limited, a holding company made up of Avianca, Viva Colombia, Viva Peru and GOL, smaller minority stake in Chilean airline Sky.


Against partnership

A few weeks ago, Ultra Air, the last Colombian low-cost airline, publicly opposed the proposed partnership between Avianca and Viva. Ultra Air, led by William Shaw (founder of Viva in 2012), claimed that a merger between these two carriers would create a monopoly in Colombia. The airline argued that fares would increase, which would directly impact competitors and small and medium-sized customers. Other airlines seem to agree.

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As Bloomberg first reported, nine airlines have asked to be involved — as interested third parties — in the Colombian civil aviation authority’s process to approve or reject the partnership between Avianca and Viva. These airlines are EasyFly, Wingo, Aerolíneas Argentinas, LATAM Airlines, Air Europa, JetSMART, SATENA and Lufthansa.

Avianca wants to form a holding company with Viva Colombia, Viva Peru and GOL Linhas Aéreas. Photo: Getty Images.

How will the partnership work?

On April 28, Avianca and Viva announced the signing of an agreement for the two airlines to be part of the same business group. The statement noted that Viva would be part of the same holding company as the Avianca Group while keeping its independent identity.

Roberto Kriete, Chairman of the Board of Avianca, said at the time that the new group “would benefit customers by having a more efficient cost structure that would allow them to offer even lower prices.”

A few days later, the shareholders of Avianca and the Brazilian GOL Linhas Aéreas announced their intention to create Abra Group Limited, a holding company made up of these two airlines plus Viva Colombia, Viva Peru and a 10% stake in Sky Airline. The creation of this holding company is currently being examined by the local authorities (having recently received the green light from Ecuador).

Nevertheless, Colombian airlines and the tourism industry are concerned about the functioning of this partnership.

The Colombian Association of Travel Agencies and Tourism (ANATO) recently said it wanted to know more about how the partnership works. She is also interested in ensuring that clients’ rights are respected. Colombian civil aviation authorities have stated that,

“In carrying out its duties, Aeronáutica Civil will carefully analyze the information, arguments and objections presented by the intervening companies and will determine, according to the highest standards of analysis developed by national and international competition authorities, the effects of the transaction on in order to adopt a decision on this subject in the light of the regulations and the principles of free economic competition.

Ultra Air and several other airlines seem to oppose the partnership between Viva and Avianca. Photo: Getty Images.

Viva’s problems

Last month, Avianca and Viva urged the government to approve the partnership to make Viva’s survival viable. They claimed the airline was facing “a complex financial situation that requires immediate intervention.”

Earlier this week, Viva said in a statement that airlines around the world are currently facing a volatile environment with several challenges, from high fuel prices to devaluing local currencies and runaway inflation. “These factors have an impact on our functioning and represent a risk”, Viva added.

Additionally, the ultra-low-cost carrier recently suspended several routes. In June, the airline suspended the Bucaramanga-San Andrés, Bucaramanga-Santa Marta and Cali-Montería routes. In August, he suspended Armenia-San Andrés-Armenia-Cartagena and Cali-Cancún. Next month, Viva will stop operating the services of San Andrés-Barranquilla, San Andrés-Cartagena, Cartagena-Villavicencio and Cali-Cúcuta.

Do you think that the partnership between Avianca and Viva would be detrimental to the Colombian civil aeronautics industry? Let us know in the comments below.

Source: Bloomberg, Aviationline.

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