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airlines Avianca announced that it is accelerating its integration process in the face of a complex economic situation for low cost Viva.
New information has arrived about the progress of the agreement between both airlines, but a new situation has been added that we did not know about: Viva dares a complex economic situation.
In context, Last April, the majority shareholders of Avianca signed an agreement to be part of the same business group, unifying economic rights. At the same time, they acquired the 100% of the economic rights of Viva on Colombia and in Peru, without this implying control or administration. A month later, After Avianca's agreement with Gol, the creation of the Open Group which would be one of the leaders in air transport in Latin America and would group the investments made in the economic rights of Viva and a convertible credit in a minority position in Sky Airline.
Now, and given the information available on the market about the delicate financial situation that Viva, this company and Avianca requested before the Civil Aeronautics of Colombia authorization to integrate, with the aim of making viable the permanence of the low-cost airline for the benefit of passengers, connectivity in Colombia and Peru, as well as to safeguard jobs that directly and indirectly depend on Viva.
Given the relevance and urgency of this request for integration for the competitiveness and air connectivity of the country, Avianca has held talks in recent days with representatives of the new government explaining the reasons for this request, which was formalized once he took possession.
It is important to point out that it is the market conditions (jet fuel price, inflation and appreciation of the dollar) those that have forced this request before the Aerocivil to be accelerated and become of maximum urgency, So in the first quarter of the year, when the operation was negotiated between the shareholders of Avianca and Viva, the financial situation of the low-cost was different and Viva estimated that it had the necessary finances to compete normally.
About, Adrian Neuhauser, President and CEO of Avianca indicated:
“The request for integration with Viva seeks to fight for its survival in the market, as well as for maintaining the competitiveness that has been built up during 10 years of operation. Even with the complex panorama that aviation is experiencing in the world due to the rise in fuel, as well as historical inflation in the region, Avianca has a solid financial position, evident in recent announcements, that would allow it to achieve synergies and take advantage of economies of scale with Viva, provide financial support and participate in its management. We trust that the Aeronautical authority can study this request quickly., given its relevance for the country”.
with the integration, Viva It would also be part of one of the most relevant Latin American airline groups and efficiencies and synergies would materialize that could benefit the rescue of the low-cost pioneer in Colombia. further, this new and solid group of airlines will allow for a more efficient cost structure, in addition to a network of routes that would promote direct connectivity between destinations, a strong loyalty program and friendly, efficient service tailored to the needs of today's traveler.
During this integration request process, to the offer of flights, service, operational discipline and other Avianca processes remain normal. in addition, the way the providers, employees and entities relate to Avianca will remain the same, maintaining own sales and communication channels, as they are known today.
The company will share the progress of this request once it receives information from the Authority.
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I was just reading yesterday in Simpleflying that the new Abra group in South America would be similar to today in Europe IAG Group, being bigger than LATAM.
Personally, the profitability and the idea of integrating these airlines seems good to me, In any case, Brazilian companies always try to form their protectionist alliances and it is difficult for them to join forces, as happened with TAM and the Chilean LAN to form LATAM.. They have no choice but to join neighboring countries, language is a barrier that makes South American integration difficult for them compared to the rest of our Spanish-speaking countries.
it's interesting, if they continue to function as IAG it would be very attractive for users, but I see it difficult with Viva and Avianca operating the same or very similar in Colombia.