Avianca To Buy Viva In Colombian Market Shake Up
On the evening of April 28th, rumors began to swirl that a deal between Avianca and Viva was in the works. Aviacionline broke the news, speculating that, by midnight, an official announcement would be forthcoming from both parties.
Rumor had it that Avianca had made an offer to Viva, and that the president of the smaller airline had noted its acceptance in a virtual conference with the airline’s employees.
Subsequently, Avianca issued a statement confirming the signing of an agreement with Viva, for the two airlines to be part of the same business group. The statement notes that Viva will become part of the same holding company as Avianca Group, and that Declan Ryan, the founding partner of Viva, will join the board of directors of the new group.
Roberto Kriete, main shareholder and president of the Board of Directors of Avianca, commented that,
“This new and strong group of airlines would benefit customers by having a more efficient cost structure that would allow them to offer even lower prices, as well as a route network that would promote direct connectivity between destinations, a strong loyalty program and a service friendly and efficient according to the needs of today's traveler. In addition, it would give Colombia and Latin America a new and stronger competitor that is sustainable over time, encouraging both players to remain relevant in the Latin American market.”
Avianca’s interest in Viva was previously noted by the newspaper La República, which said around a week ago that the airline was considering doing business with the smaller airline. It said that the two airlines were in consultation with the Superintendency of Industry and Commerce (SIC), a body that takes responsibility for analyzing competitive fairness.
Details of the deal
While Avianca will assume operational and financial control of Viva and its Colombian and Peruvian subsidiaries, the Viva brand and identity will live on. According to the statement, the control of the airlines will remain totally independent, and passengers will be able to enjoy two companies with competitive prices.
Avianca provided the below illustration of how the partnership will work:
The deal still needs to go through the usual regulatory processes, and until that happens, there will be no chance to the function of either airline. Avianca notes that the decision to unify the economic rights of both groups into the same holding company is a direct influence of the impact of COVID-19 on the industry.
Declan Ryan, the founding partner of Viva, added,
“This is an important day for Viva as it is the perfect setting to continue with our growth and expansion strategy, maintaining the flag of air inclusion and strengthening our company. In addition, if in the future the authorities approve the management of both groups in the same holding company, it will encourage the air transport market to continue growing, promoting low rates for users and a good service with the best punctuality, giving everyone the opportunity to fly to many destinations around the world. Likewise, it will be a source of qualified employment generation, giving more and better job opportunities to current and future collaborators, as well as continuing to positively impact the connectivity of Colombia, the region and the economic development of the country.”
A powerful partnership
Avianca, which has recently exited its Chapter 11 restructuring, has had a strong start to 2022. Many of its routes have been restored, new routes have launched, and the airline confirmed an order for 88 Airbus A320neos just last month.
Its interest in Viva is unsurprising, given the airline’s exceptional performance, even during COVID. With Viva’s help, Colombia’s air traffic has already surpassed pre-pandemic levels, with the carrier handling 5.18 million passengers in 2021 and growing by almost 20%.
This deal represents a significant consolidation in the Colombian marketplace, and in Latin America generally. Between the two airlines, the market share in Colombia will reach 65%. The inclusion of Viva Peru in the agreement suggests that Avianca’s interests extend beyond the borders of Colombia, and that it intends to make waves on the regional stage too.
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