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 third parties interested in the ongoing process that could lead to the first step of creating the Abra Group Limited, a holding composed of Avianca, Viva Colombia, Viva Peru, and GOL, plus small minority ownership of Chile’s Sky Airline.

Against the partnership

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

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

Two Avianca aircraft

Avianca wants to form a holding 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 become part of the same holding company as Avianca Group while keeping its identity independent.

Roberto Kriete, president of the Board of Directors of Avianca, said at that moment 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 Brazil’s GOL Linhas Aéreas announced their intention to create the Abra Group Limited, a holding composed of these two airlines plus Viva Colombia, Viva Peru, and a 10% ownership of Sky Airline. The creation of this holding is currently under scrutiny by local authorities (having recently received the green light from Ecuador).

Nonetheless, Colombian airlines and the tourism industry are worried about how this partnership would function.

Colombia’s Travel Agencies and Tourism Association (ANATO) recently said it is interested in knowing more about how the partnership would work. It is also interested in guaranteeing that the customers’ rights are respected. Colombia’s civil aviation authorities have said that,

“In the exercise of its functions, Aeronáutica Civil will carefully analyze the information, arguments, and exceptions presented by the intervening companies and will determine, following the highest standards of analysis developed by the national and international competition authorities, the effects of the transaction in order to adopt a determination on the same in light of the regulations and principles of free economic competition.”

An Ultra Air aircraft

Ultra Air and several other airlines seem to be opposing Viva and Avianca’s partnership. 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 faces “a complex financial situation that requires immediate intervention.”

Earlier this week, Viva said in a statement that airlines worldwide are currently facing a volatile environment with several challenges, from high fuel prices to the devaluation of local currencies and ramping inflation. “These factors impact our operation and represent a risk,” Viva added.

Moreover, the ultra-low-cost carrier has recently suspended several routes. In June, the airline halted the routes Bucaramanga-San Andrés, Bucaramanga-Santa Marta, and Cali-Montería. In August, it 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 the partnership between Avianca and Viva would be detrimental to Colombia’s civil aviation industry? Let us know in the comments below.

Source: Bloomberg, Aviacionline.


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