Avianca, one of the largest airlines in Latin America, has publicly criticized Colombian authorities for their decision to block the company’s plan to “rescue” low-cost carrier Viva Air. The plan, which was announced in November 2020, would have seen Avianca acquire a controlling stake in Viva Air and merge the two companies in an effort to strengthen their competitiveness in the region. However, the Colombian government’s civil aviation authority, the Aeronautical Authority (AAC), denied the merger on the grounds that it would lead to a significant reduction in competition in the domestic market.
Avianca’s Struggles and the Viva Air Acquisition Plan
In recent years, Avianca has struggled financially due to a combination of factors, including the COVID-19 pandemic and the company’s heavy debt load. In an effort to turn things around, Avianca’s board of directors began exploring options for consolidating the company’s operations, with the acquisition of Viva Air being one of the options considered.
The acquisition would have seen Avianca take a controlling stake in Viva Air, with the two companies then merging their operations in order to create a more competitive entity. The goal of the merger was to increase the combined company’s efficiency and reduce costs, in the hopes that this would allow them to better compete with other airlines in the region.
Colombian Authorities Block the Merger
However, the Aeronautical Authority (AAC) denied the merger on the grounds that it would lead to a significant reduction in competition in the domestic market. According to the AAC, Avianca and Viva Air are two of the largest airlines in Colombia and the merger would have created a near monopoly in the domestic market, which would have been detrimental to consumers.
Avianca’s Response
In response to the AAC’s decision, Avianca has publicly criticized the Colombian authorities, arguing that the merger would have actually increased competition in the region by creating a stronger company that would be better able to compete with foreign airlines. The company has also pointed out that the merger would have brought benefits to consumers, including more destinations and more flight options.
Avianca also expressed their disappointment over the decision and how important it is for the company, it would have rescued the company from its difficult financial situation, and helped to secure jobs for the thousands of employees who depend on the company for their livelihood.
Conclusion
The decision by the Colombian authorities to block the merger of Avianca and Viva Air has been met with significant criticism from Avianca, which has argued that the merger would have increased competition in the region and brought benefits to consumers. While the AAC’s decision was based on the belief that the merger would have led to a significant reduction in competition, Avianca has argued that the opposite would have been true. The situation highlights the complex dynamics involved in mergers and acquisitions and the difficult decisions that regulators must make in order to protect the interests of consumers.