Less than 10 days ago, the only option being considered to save Viva Air’s operations in Colombia was its business integration with avianca, but now the company has two additional offers on the table to consider.
At the moment, Viva has a domestic market share of 20.2 percent and its fleet is made up of 21 Airbus320 family aircraft. In addition, it has 45 routes that travel to 27 destinations in Colombia, Peru, the Dominican Republic, Argentina, Brazil and the United States.
(Also read: Viva Air will restructure its debts to achieve its permanence in the market)
In 2022, an average of 8.4 million passengers From, to and within Colombia. It is also responsible for 5,000 direct and indirect employees.
The first interested party in Viva was Avianca, which after buy the economic rights of VivaIn August 2022, he requested authorization from Aerocivil so that both are part of the same business group and thus have their political rights.
After five months of study, on January 18 the authority verified that there had been a «a substantial irregularity» in the process, therefore the first decision was annulled, which consisted of not providing the guarantee for this operation due to its risks for competition in the sector.
This integration is being studied again, but now Law 1340 of 2009 (Competition Regime) is being taken into account and not Law 1437 of 2011, which was used for the first part of the process.
Despite the fact that it has been publicly stated that Viva Air is in a «precarious, critical and extremely difficult financial situation», Avianca says that its integration is a great opportunity for it to really tourism is an engine of development and that Colombia can be a hub of connectivity for all of Latin America.
«We believe that the right thing for Colombia is to support the rescue of Viva, because the only thing that its disappearance will do is reduce competition, and not increase it. We must save the jobs they representthe connectivity it has in the regions, to the passengers who have already bought tickets, and what worries us is that a crisis would be generated in the sector if Viva disappears,» Avianca told EL TIEMPO.
In addition, according to the company, this operation can strengthen Viva’s low-cost model and make it self-sustaining as soon as possible and inject fresh resources so that, beyond the crisis, it can grow in the medium and long term.
In order to get the integration approved and to be able to stay with Viva, Avianca has raised several conditions, which include, among other aspects, until delivering 105 slots (takeoff and landing permits) from El Dorado airport. With these spaces available in different time slots, another airline could operate up to 15 additional aircraft.
«If Viva, which has significant relevance in the national market, is acquired by Avianca, obviously there will be a control of more than 50 percent from the local marketColombia being an important market. We also have to see that it would gain participation in other routes that are operated in Ecuador, Lima and other international ones,» said Claudia Velásquez, an expert in aeronautical issues.
(Also read: Latam Airlines enters the bid with Avianca and Jetsmart to buy Viva Air)
JetSmart wants to acquire 100% of the shares of Viva Air
JetSmart, the second to raise its hand
On February 7, JetSmart announced that it is willing to buy 100 percent of the shares because «he sees a very valuable opportunity in the Colombian marketwhich today ranks number two in the region». Likewise, it has the purpose of «democratizing the air service in South America, with affordable rates for all travelers».
Buying Viva would represent JetSmart savings in time, costs and proceduressince the initial plan to enter Colombia was through the request for some 27 routes, which was made in November 2022. However, buying a fully constituted company also brings some risks, such as debts that at this time are not So visible, Velasquez explained.
According to JetSmart, it currently has the financial capacity, transaction experience, and operational capacity to bring the Viva purchase to a successful conclusion. likewise is willing to respect the free marketwithout having a dominant position.
And unlike Avianca, it does not see any inconvenience in the fact that other interested parties appeared in the purchase of Viva, «as long as it is carried out within due process and in a transparent manner before the authorities and consumers.»
It refers specifically to Latam Airlines, which in the last few hours has also stated that it is interested in acquiring the low-cost airline. This operation would represent a growth opportunity to have a greater presence in the market.
«In Colombia, especially at the El Dorado airport, there is a capacity restriction and that means that there are no slots available to develop growth plans. A possible acquisition of alive It gives us an opportunity to develop plans in the country and without a doubt we must analyze it”, Latam expressed to EL TIEMPO.
He also explained that his interest in this company will increase after Viva Air will announce that it will benefit from a reorganization and negotiation process with its creditors within 90 days. “This gives Viva, and all of us who come to analyze it, the opportunity to have a company that is more viable going forward,” he added.
To advance in these transactions, Latam is already «tuning» its internal team to start this analysis and in a few days it expects to have the investment banking to accompany the process and be able to understand the particularities of the company and its creditors.
Claudia Velásquez said that the offer made by an airline like JetSmart, which is gaining share in the Chilean market, is a message for Latam about where this airline wants to grow and project itself. «It is a position to go marking who is who in the latin american market«.
(Also read: Viva Air’s controlling shareholder is interested in negotiating with JetSmart)
Latam will hire an investment bank to accompany it in the process.
Avianca’s counterattack
For Avianca, these proposals from Latam and JetSmart represent not only a local but a regional interest to consolidate their positions in Latin America. «The battle that is taking place in Colombia is for weaken Avianca and Vivathat under the same group they will be able to compete at the regional level”, he said.
It also questions the credibility of the interest of these two airlines to take over Viva at this time, since for more than six months Avianca stated that «there was a crisis and never interested. What they have done is deny the crisis and say that when capacity is lacking they will bring capacity.»
«However, it appears now, late, at a time when Viva is already in a restructuring process, is losing planes and is closing operation in bases like Cali,” he added.
In addition, Avianca stated that These proposals are clearly unfeasible. because it requires additional time that Viva no longer has, according to its most recent announcements; a buyer-seller negotiation that also requires time and more approvals in other markets such as Peru, Argentina or Chile where Latam and Viva (in the case of Latam) or American Airlines, JetSmart and Viva (in the case of JetSmart) operate.
«We believe that I don’t trust those offersthat competitors are trying to delay and confuse to prevent us from being able to negotiate the transactions that we have proposed,» he says.
