Colombia Blocks Avianca and Viva Air Merger

The Avianca and Viva Air merger has hit a major roadblock with Colombian authorities objecting to the proposed combination. The move could be a blow to Avianca’s plan to create a pan-South American airline group with Brazil’s Gol.

Colombia’s Civil Aeronautics Authority, or Aerocivil, said Tuesday that the merger of the country’s first and third largest airlines could reduce competition and hurt consumers. It could also increase the barriers faced by competitors in the market. In addition, Aerocivil said the financial situation at Viva Air, which the airline’s claimed required expedited approval of the merger, was not so bad as to “affect its viability in the market.”

“We are concerned about the direction of the decision, as it … ignores the potential effect that the disappearance of Viva would have on users and the market,” Avianca CEO Adrian Neuhauser said in a statement on the decision. “At Avianca, we reiterate our willingness to actively participate in rescuing Viva.”

Avianca first announced plans to acquire Viva Air, but not merge with it, in April. However, in August the airlines requested expedited antitrust approval from Aerocivil for a merger that was “vital for the sustainability and development” of Viva Air. In an October interview, Viva Air CEO Felix Antelo said the airlines planned to continue operate as separate brands but would coordinate schedules and fares in order to offer travelers better flight options.

“It will provide for us a financial muscle way stronger and better than what we had before,” he said. “We are going to keep the [low-cost] model around, we’re going to keep the brand around, [and] we’re going to keep the low fares around.”

Antelo also said that “staying independent in aviation in the 2020s is not an option.”

The Avianca-Viva Air merger is the first step in the creation of Abra, a new South American airline holding company created by the merger of Avianca and Gol. The group also has the option to take at least a 42 percent stake in Chile’s Sky Airline.

Aerocivil said it would reconsider the deal if Avianca and Viva resubmit their merger application and offer “remedies” to boost competition.

Updated with comment from Avianca CEO Adrian Neuhauser